Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — TRADE AND INDUSTRY

Overseas Trade Fairs (Expenditure)

Mrs. Renée Short: asked the Secretary of State for Trade and Industry how much is being spent during this year by his Department to aid British firms wishing to exhibit at trade fairs abroad; and how much of this goes to firms exhibiting in West and East European countries, respectively.

The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant): Expenditure on aid to firms participating in trade fairs abroad is estimated at £4·8 million in 1971–72. Of this, some £2·3 million is expected to be spent on events in West European countries and £700,000 in East European countries.

Mrs. Short: I am grateful for that information but surprised to hear how little is being spent on stimulating trade with Eastern Europe, since the population of Eastern Europe is about 350 million—far more than the population of the Common Market—and our export trade is just under £300 million a year. Does not the hon. Gentleman think that it would be worth while to put more effort into this, as it is an expanding market and will be for many years to come?

Mr. Grant: I very much hope the hon. Lady is right, and that it will be an expanding market, but expenditure is to some extent conditioned by the number and frequency of trade fairs, and in this respect the figures are approximate to those in previous years.

Mr. Blaker: Does not our balance of trade with the Soviet Union remain heavily adverse, in spite of Soviet protestations to do better, and will my hon. Friend press the Soviet Union on this matter?

Mr. Grant: My hon. Friend is quite right in what he says. I assure him that we have made known to the Soviet Union on more than one occasion the points he has in mind.

Oral Answers to Questions — RB211

Mr. Walter Johnson: asked the Secretary of State for Trade and Industry if he is now in a position to make a further statement on the Rolls-Royce RB211 engine.

Mr. Dalyell: asked the Secretary of State for Trade and Industry if he will make a statement on the latest position regarding the RB211 engine.

The Minister for Aerospace (Mr. Frederick Corfield): I informed the House on 10th May of the position reached in negotiations on the RB211 engine. We now await a decision from the United States Government whether they will provide the necessary support to enable Lockheed to complete the TriStar project for which the RB211 is intended.—[Vol. 817, c. 32–8.]

Mr. Johnson: It now appears that the American Congress is unlikely to support the bank loan for Lockheed. Bearing in mind that the proposed legislation which the American Government are trying to put through Congress may not be concluded—

Hon. Members: Speech.

Mr. Speaker: Order. The hon. Gentleman must ask a question.

Mr. Johnson: —by the time Congress rises for the Summer Recess, will the Minister give an undertaking that work one the RB211 engine will go on? It is suggested that the main objection to the bank loan is lack of firm orders. Will the Minister ask B.E.A., as a matter of urgency, to make a decision on the purchase of the TriStar, because I believe that that could clinch the deal?

Mr. Corfield: On the continuation of the RB211 beyond 8th August, I have


nothing to add to what my right hon. Friend said on 14th June. With regard to B.E.A.'s order, this is a matter for B.E.A.'s commercial judgment, bearing in mind that there are other aircraft available with British contributions.

Mr. Dalyell: What advice does the Minister have for Rolls-Royce sub-contractors?

Mr. Corfield: I have nothing further to add to my previous statement on that subject.

Mr. Rost: Will my hon. Friend say whether his Department is investigating the prospect of using the RB211 engine in the VC10?

Mr. Corfield: This and other matters are subject to consideration. They are only peripheral and do not in themselves, as I see it, justify the production of this engine.

Oral Answers to Questions — South Lancashire

Mr. H. Boardman: asked the Secretary of State for Trade and Industry if, in view of the decline in employment in the textile and coal industries, and the threatened closure of Irlam Steel Works, he will now provide incentives for new industry in the south Lancashire area.

Mr. Anthony Grant: An extension of assisted area status to South Lancashire could not be justified at present.

Mr. Boardman: Whilst I appreciate that there is not much foot-loose industry at the present time, if the eventual closure of this steel works is confirmed, will the Minister act quickly to encourage alternative industry to go in?

Mr. Grant: We have said that we shall keep assisted areas under constant review, and this will obviously be a factor which we shall take into consideration.

Mr. Gardner: Will my hon. Friend keep a vigilant eye on the North-West of Lancashire and do what he can to encourage new industries to any part where present industries are in danger of failing or dying, especially bearing in mind the needs of areas such as Kirkham where the recent closure of a mill has caused serious unemployment?

Mr. Grant: The answer to my hon. and learned Friend is "Yes, Sir", subject, of

course, to the overriding needs of areas worse affected.

Oral Answers to Questions — Machine Tool Industry

Mr. Edelman: asked the Secretary of State for Trade and Industry what further support he proposes to give the machine tool industry in substitution for the assistance given to it by the Industrial Reorganisation Corporation.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies): Private financial institutions exist to provide expert advice to concerns requiring it as well as to organise the provision of finance in suitable cases.

Mr. Edelman: Is the right hon. Gentleman aware that orders for machine tools are now at a record low figure, and that redundancies are continuing to rise? Does he agree that what is necessary for the machine tool industry is a general inflation of the economy in order to encourage investment and re-equipment of industry generally so that the machine tool industry may benefit from it?

Mr. Davies: I am very conscious of the fact that the machine tool industry is particularly responsive to the climate of investment at any time. This is clearly a matter that I am keeping very much in mind.

Mr. Dell: The Secretary of State has for some months had the report of the committee of inquiry into the machine tool industry. Can he say when he will announce the conclusions he draws from that report?

Mr. Davies: I am indeed looking at the whole of the problems of the machine tool industry, and I have to see in due course whether these considerations give rise to any conclusions that I can usefully communicate.

Oral Answers to Questions — European Economic Community

Mr. Lane: asked the Secretary of State for Trade and Industry if he will list the industries which he expects to benefit from British membership of an enlarged European Economic Community.

Mr. John Davies: Probably all United Kingdom industries are potentially


capable of benefiting from what would eventually be a greatly enlarged home market. Much would depend on the enterprise shown by individual firms.

Mr. Lane: Is it not clear that most of British industry is eagerly looking forward, as my right hon. Friend has confirmed, to the opportunities presented by an enlarged Community, and is this not another reason why the whole nation should approach the prospect with confidence rather than with apprehension?

Mr. Davies: My clear belief is that the balanced judgment of British industry generally is very much in favour of membership and believes that it will derive very great advantages from it.

Mr. Benn: Will the Secretary of State give the House a categorical assurance that the White Paper, when published, will contain all the documents that may bear on industries other than steel and coal, which were recently commented on as the result of the negotiations that were conducted with the Six?

Mr. Davies: I believe that the White Paper will give a very wide field for discussion of all the issues involved. To produce all the documents would, as the right hon. Gentleman knows, be quite impossible.

Mr. Arthur Lewis: asked the Secretary of State for Trade and Industry what will be the position after entry of joint trading and business arrangements concluded prior to British entry into the European Economic Community between countries and companies within the Six and the United Kingdom affecting both Government and private enterprise, giving details of individual agreements.

Mr. John Davies: Bilateral trade arrangements between the United Kingom and France, Germany and Benelux, which relate to only a small part of our trade with those countries, would cease to apply in the transition period. Intergovernmental agreements and arrangements on technological projects will continue. It would not be possible to provide the details without a disproportionate expenditure of time and money. Agreements between United Kingdom and E.E.C. companies would have to accord with the rules of the Community.

Mr. Lewis: That is a complicated answer. Can the Minister give an assurance that the White Paper will fully deal with this aspect? As I understand it, it will mean that we shall once again be on the losing end. The right hon. Member does not seem to be able to give us any facts or figures without spending an undue proportion of time and money. Is not he aware that the House and the country want to know what is happening? Instead of spending thousands of pounds issuing propaganda, let us have the facts and figures, and do not say that it costs money to get them.

Mr. Davies: The hon. Member should be reassured to know that the changes in these arrangements will give rise to an expansion in trade rather than the contraction that he feared.

Oral Answers to Questions — "Southern Cross" and "Northern Star" (Missing Persons)

Mr. John Hannam: asked the Secretary of State for Trade and Industry how many missing persons have been reported from the liners "Southern Cross" and "Northern Star" during the period January, 1970 to June, 1971.

Mr. Anthony Grant: During the period January, 1970, to June, 1971, three persons were reported missing from the "Southern Cross" and one from the "Northern Star".

Mr. Hannam: I thank my hon. Friend very much for that reply, and also for the attention he has given to the case of a constituent. Does not my hon. Friend consider this to be a rather alarming number of cases to arise from two sister cruise ships? Does he consider that the present system of inquiry into deaths at sea is working satisfactorily? Will he not consider reopening the inquiry into this instance?

Mr. Grant: I do not think that there is power to reopen inquiries. As to any coincidence between these two ships, it would be wrong to draw any conclusions. These were, as I understand it, different types of accident occurring in different circumstances at different times. The system by which we investigate these accidents can be improved, and this will be done when regulations are laid before the House as a result of the recent Merchant Shipping Act.

Oral Answers to Questions — Paper Bags (Charge to Customers)

Mr. Kaufman: asked the Secretary of State for Trade and Industry whether he will seek powers to prevent shopkeepers from making a separate charge for paper bags without informing customers that this is their practice.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley): No, Sir. I have no doubt that other shoppers are as alert as the hon. Member in ensuring that they are not overcharged, whether deliberately or by mistake, for goods they purchase, and that they react accordingly.

Mr. Kaufman: But in a time of rising prices such as this why will not the Minister take action to protect shoppers from conning devices like this indulged in by an unscrupulous minority of traders? Why will he not take action to help housewives by drawing up a code of fair shopping practice?

Mr. Ridley: We have had no complaint, other than that from the hon. Member, about this matter at all. I think that we should leave it open to the shopper to take or not to take a paper bag, and I do not believe that competition is not the best answer to this problem.

Oral Answers to Questions — Shirt, Collar and Tie Manufacturers' Federation

Mr. Normanton: asked the Secretary of State for Trade and Industry what correspondence he has had recently with the Shirt, Collar and Tie Manufacturers' Federation; what was the substance of their representations; and what action he proposes to take to maintain and promote he best interests of this section of manufacturing industry.

Mr. Ridley: The Federation recently proposed a new origin marking order for men's shirts and pyjamas but has been informed that we do not consider that the arguments so far advanced justify such an order.

Mr. Normanton: I thank my hon. Friend for his reply, but is he aware that there is still very considerable concern in this important and responsible section of British industry over his decision? With respect, my hon. Friend has not

replied to the final sentence in my Question, which asks him
… what action he proposes to take to maintain and promote the bests interests of this section of manufacturing industry."

Mr. Ridley: I do not accept that the absence of an origin marking order will harm British industry. It is open to British industry, if it so wishes, to mark its goods "Made in Britain", if it believes that it will be to its advantage. I am certain that that is the right course for British industry to follow.

Mr. Lipton: Is not the hon. Gentleman aware that the necktie often costs more than the shirt? Will he find out from this organisation why that is so?

Mr. Ridley: I suggest that the hon. Gentleman takes the advice of his hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman), and tries to do some better shopping.

Oral Answers to Questions — Steel Industry (E.E.C. Membership)

Mr. Jay: asked the Secretary of State for Trade and Industry whether he can give an assurance that the expansion of the British steel industry will not be limited by the European Steel and Coal Community in the event of the United Kingdom becoming a member.

Mr. John Davies: Yes, Sir.

Mr. Jay: In that case, will the Secretary of State now publish, so that hon. Members can have it, the memorandum on the subject from the European Coal and Steel Community which was presented to the Government on 4th May?

Mr. Davies: No, Sir. If all the documents which are part of the negotiations were published, it would make negotiation exceedingly difficult—[HON MEMBERS: "Oh."] I realise that something that must be very approximate to the document has recently appeared.

Mr. Michael Foot: Following the right hon. Gentleman's last reply, will he absolutely confirm to the House that the document originally published in The Guardian and republished today in the Financial Times is the authentic document? Second, will he confirm that the British negotiators made no objection to the document, and raised no point in


opposition to it? Third, will he confirm that it was the original intention of the Government not to disclose these discussions to the House or the country even in the White Paper, which is why the White Paper in this respect is now being rewritten?

Mr. Davies: The hon. Gentleman would do very well to wait for the White Paper, when the matter can be fully discussed. The Guardian article was a commentary and did not pretend to be an exact reproduction of the document itself. But, as I say, the whole matter can better await the publication of the White Paper.

Mr. Lane: Is not this another example of an anti-Market hare which is not going to run?

Mr. Davies: Yes, Sir. I do not think that it has very far to run, I am bound to say.

Mr. Foot: But since on New Zealand and on Commonwealth sugar the Government were perfectly prepared to claim that they had made objections to the original demands of the Community, even though eventually they conceded them in general, or in the main part, why does the right hon. Gentleman refuse to tell the House, and the people who work in the steel industry or the coal industry, what the response of Her Majesty's Government was when this document was lodged with them? If such information could be given on the other matters, why is it being withheld in this case?

Mr. Davies: It is the Government's belief that the negotiators, at the time of the negotiation, handled the essential issues which surround these problems. As I say, the matter will be very much clearer when the White Paper is issued, and I suggest that it can better be discussed then.

Oral Answers to Questions — Industrial Development Certificates (Birmingham)

Mr. Chapman: asked the Secretary of State for Trade and Industry how many industrial development certificates have been applied for within the city of Birmingham since 1st July, 1970; how many were granted; and what were the appropriate figures for the previous 12 months.

Mr. Anthony Grant: In the period 1st July, 1970 to 31st May, 1971, 80 industrial

development certificates were issued in the Birmingham Group of Employment Exchange Areas and 10 were refused. The figures for the period 1st July, 1969 to 30th June, 1970 were 160 and 23 respectively.

Mr. Chapman: While appreciating that the purpose of industrial development certificates is to encourage expansion of industry in the development areas, and my hon. Friend's greater flexibility to wards this matter, as instanced by the raising of the exemption level for expansion of industry from 3,000 to 5,000 sq. ft., may I ask whether he would be pre pared to go further and state categorically that, in looking at individual applications, if a firm can show that it cannot expand in a development area it will be allowed to expand in a non-development area, bearing in mind the recent example in the West Midlands where a firm has lost £100,000 by the refusal of an I.D.C. because it was not able to open up or expand—

Mr. Speaker: Order. Supplementaries must be brief.

Mr. Grant: As my hon. Friend said, one reason for the change in the figures was the I.D.C. exemption limit being raised from 3,000 to 5,000 sq. ft. It will not be practicable to change the policy generally in the way suggested by my hon. Friend. We operate a flexible policy. In Birmingham, modest expansion by firms which have strong ties with the area—expansion designed to improve efficiency—will be allowed subject to giving priority to development and intermediate areas.

Mr. William Price: Is the hon. Gentleman aware that West Midlands Tory Members of Parliament have been arguing for years that all that the Midlands needed if they wanted industry was to get rid of the Labour Government? Is he aware that he has just about demolished the whole lot?

Mr. Grant: I do not accept that. I am saying that with the limited supply of mobile industry it is important to give priority to the assisted areas.

Oral Answers to Questions — Rolls-Royce Ltd.

Mr. Rost: asked the Secretary of State for Trade and Industry when he expects to be in a position to make a


further statement on the price to be paid for the acquisition of Rolls-Royce Limited assets by Rolls-Royce (1971) Limited, and the basis upon which such a price has been calculated.

Mr. Corfield: The determination of this price is a matter of considerable complexity, and is bound to take a substantial time. I cannot at the moment forecast when it will be possible to say anything further, but the parties concerned, of course, recognise the need for an early settlement.

Mr. Rost: Does the Minister agree that the most valuable asset of Rolls-Royce is its goodwill, which includes the vast expenditure on research and development which absorbed the bulk of the capital which the company lost over the years, but without which the new company cannot make the profits which it appears to be making now? Will he confirm that this will be taken into account when the price is finally fixed?

Mr. Corfield: An element of goodwill comes into this, but it is essential that we get the profit forecast accurate. By the time we have multiplied it by the number of years purchase, errors can turn out to be considerable sums.

Mr. Whitehead: We have the word of the receiver that the purchase price for Rolls-Royce assets will very much depend on the final settlement of the RB 211 deal. Will the right hon. Gentleman tell the House what representations have been received from the United States Government about the continuation of British guarantees of support after 8th August? If he cannot do so, will he tell the House whether we shall have some statement on this matter before the recess?

Mr. Corfield: I am not aware that the receiver has made the valuation in any way dependent on the continuation of the RB 211, for fairly obvious valuation reasons. I shall ensure that before the recess the House is kept up to date with the situation as it then stands.

Oral Answers to Questions — Miners (Redundancy Agreement)

Mr. Skinner: asked the Secretary of State for Trade and Industry whether he is now in a position to consider a review of the miners' over-55 redundancy agreement to take account of inflation.

Mr. Ridley: Yes, Sir. Preliminary work on the review is in hand and I hope shortly to be in a position to have discussions with the National Coal Board and the National Union of Mineworkers.

Mr. Skinner: I am pleased that the Minister is getting on with the job which he promised on Third Reading of the Coal Industry Bill a few months ago. When he discusses the matter with the National Coal Board and, more particularly, with the N.U.M., will he take into account that he might take a line through, say, Lord Robens' recent award of about £2,500 after ten years' service? Bearing in mind that some of the miners get as low as 30 per cent. of take-home pay, taking into account real money values at the present time, will he see that the 90 per cent. is carried through on a proper basis?

Mr. Ridley: We clearly appreciate the effects of inflation upon the scheme and, indeed, on other Government pension schemes, and we shall consider them all in that light.

Mr. Varley: Is the hon. Gentleman aware that during the proceedings on the Coal Industry Bill the matter raised by my hon. Friend was fully discussed and a pretty firm undertaking was given by the Government that the erosion of the redundancy scheme would be taken fully into account in the discussions to which he has referred? If it is not taken into account, we on this side will regard it as a broken pledge.

Mr. Ridley: The hon. Gentleman has no reason to regard it as a broken pledge. I said to his hon. Friend that we were continuing to take this into account and that we shall continue to do so in the discussions which will follow.

Oral Answers to Questions — Upper Clyde Shipbuilders Limited

Mr. Millan: asked the Secretary of State for Trade and Industry if he will now make a further statement about Upper Clyde Shipbuilders Limited.

Mr. John Davies: No, Sir. The many questions answered in the House on this subject have explained the Government's position. As soon as I am in a position to make a further statement I shall do so.

Mr. Millan: In view of the appalling unemployment figures on Clydeside, will


the right hon. Gentleman take it from me that no reconstruction of Upper Clyde will be acceptable unless it preserves all existing jobs? Will he impress that upon the four advisers whom he has appointed?

Mr. Davies: I take note of what the hon. Gentleman said, but I feel sure that he will agree that, in the interests of the people employed there, the important thing is to have long-term viable and prosperous shipbuilding on Upper Clyde.

Mr. Benn: As the liquidator has money to pay wages until 5th August, will the right hon. Gentleman assure the House that there will be no redundancies declared in Upper Clyde during the long recess?

Mr. Davies: I shall have to look at the matter as soon as I have the advice of the team of experts which I have assembled to give advice on the subject and had an opportunity of talking further to the liquidator. At this stage I cannot go further than I have already gone.

Mr. Lawson: asked the Secretary of State for Trade and Industry why he suspended credit guarantees in respect of ships being built by Upper Clyde Ship builders Limited.

Mr. Ridley: I refer the hon. Member to my replies to the hon. Member for Glasgow, Craigton (Mr. Millan) and other hon. Members on 28th June.

Mr. Lawson: Will the hon. Gentleman say how it is that his right hon. Friend can say that he had only 48 hours' notice of the difficulties of this concern, when it is quite clear from the answers we have had that his Department have been in touch with either the director or the company since mid-October of last year?

Mr. Ridley: As I explained in answer to the last Question, we had doubts about the viability of U.C.S. in the autumn of last year. These doubts were resolved by the capital reconstruction and the injection of funds from ship owners which enabled the Government to grant credits again to U.C.S. The Government would certainly not have granted credits if they had not been confident about the viability of U.C.S. at that time.

Mr. Buchan: asked the Secretary of State for Trade and Industry if he will

publish in the OFFICIAL REPORT a copy of the letter dated 3rd May, 1971 written to his Department by Upper Clyde Shipbuilders Limited.

Mr. John Davies: A letter sent by the company on 3rd May was published in the OFFICIAL REPORT on 28th June.—[Vol. 820, c. 9.]

Mr. Buchan: I am aware of that, but will the Secretary of State make sure that his right hon. Friend the Prime Minister is aware of it, because he did not seem to realise the facts given in it last week. Is not this letter yet another example of the squalid conspiracy initiated by his hon. Friend the Under-Secretary to butcher Upper Clyde? Did not the letter make it perfectly clear that while the company was in a favourable trading position, the cash position was acutely difficult, which the right hon. Gentleman said that he did not know until 48 hours previously?

Mr. Davies: I take it that the hon. Gentleman has either not read what I said or has not read the letter. The letter quite clearly accompanied a delayed statement on the state of the company at the end of March, which should have been in earlier. It was a delayed statement. The company declared in February its confidence in its own future. The Government accepted that, and renewed, as my hon. Friend has said, the provision of guarantees. The company only then, on 7th May, realised that it was not in possession of adequate knowledge about its financial future and commissioned a study of it. That study emerged on 7th June, when, for the first time, the company apparently realised that it was trading in deficit. It informed me of that matter 48 hours later, and 48 hours before it proposed to appoint a provisional liquidator. Those are the facts.

Mr. John Robertson: asked the Secretary of State for Trade and Industry how much additional public money he has now committed to keep work going at Upper Clyde Shipbuilders Limited and to provide assistance for a reconstruction of the company.

Mr. John Davies: As I said in the Answer I gave the hon. Member and others on 28th June, the best estimate of the Provisional Liquidator's total requirement from the Government until


6th August is £3 million.—[Vol. 820, c. 12.]

Mr. Robertson: Does the Secretary of State agree that the proposed reconstruction might have been carried out at less cost to the taxpayer and with less disruption to the industry if there had been an outright acquisition by the Government?

Mr. Davies: No, I do not think so. In fact, it was not even practicable because of the inadequate notice which the Government had of the liquidation. I doubt even so that it would have been a sensible solution. The right solution is the solution that the Government are pursuing, to try to bring about a viable, effective reconstruction on the Clyde. I greatly hope that this will be the outcome of these affairs.

Mr. Benn: Will the Secretary of State now give the House his estimate of the total cost falling on public funds from the redundancies expected due to the reconstruction?

Mr. Davies: No. I have said earlier that at present it is impossible to say what the employment outcome will be on the Upper Clyde, so clearly the right hon. Gentleman's question cannot be answered. However, as the right hon. Gentleman seems singularly unable to see the difference between the two, it is worth while my mentioning that to put in £3 million to procure a healthy construction is much better than putting in successions of £6 million to bolster up.

Mr. Rankin: asked the Secretary of State for Trade and Industry what is the number of ships presently under construction at Upper Clyde Shipbuilders Limited; those ready for launching; and the total number on the order book.

Mr. Ridley: Work is proceeding on 14 ships, of which six have been launched and are fitting out. Two more of these ships are expected to be launched by the end of July. The total order book is 31 ships.

Mr. Rankin: Does the hon. Member agree that ships under construction, ships ready for launching and ships on the order book all represent potential wealth? Will he promise that money will always be forthcoming to make that potential

wealth a real thing in the community life of Scotland—and of England, too?

Mr. Ridley: Whether it is in the interests of all concerned to complete a specific contract is a matter which the liquidator is by law bound to consider, and it would be wrong for me to seek to interfere with him.

Mr. Rankin: On a point of order. Here is an issue of almost life and death—[Interruption.] Of course it is. Instead of the Minister's giving an answer that includes his responsibility he seeks to shove it on to the liquidator, over whom we have no control.

Mr. Speaker: The hon. Member knows that that is not a point of order.

Oral Answers to Questions — New Towns, Scotland (Special Development Area Status)

Mr. Eadie: asked the Secretary of State for Trade and Industry if Her Majesty's Government has reached a decision on future special development area status for new towns in Scotland that are at present excluded.

Mr. Anthony Grant: No, Sir. But the Government hope to be in a position to announce a decision shortly.

Mr. Eadie: Is the hon. Gentleman aware that there is great concern in, for example, the new town of Livingstone at the Government's delay in announcing a decision? Is he aware that a favourable decision would mean a considerable boost to morale in Livingstone?

Mr. Grant: I appreciate that very much. The hon. Gentleman has repeatedly urged it upon me. We have to weigh the consequences of a further extension of S.D.A. status. We can justify it only if these towns can make a substantial contribution to solving the problems of the new S.D.As. We have completed our discussions with the Development Corporation. The Government are considering the matter and I hope that we shall be able to make an announcement fairly soon.

Oral Answers to Questions — Exports to Australia

Mr. Redmond: asked the Secretary of State for Trade and Industry what was the value of British exports to Australia in 1968, 1969 and 1970, respectively; and what proportion of this is


represented by the products of the shipbuilding industry.

Mr. Anthony Grant: £321 million, £323 million and £346 million respectively, of which ships and boats represented between 1 and 1½ per cent.

Mr. Redmond: Does my hon. Friend agree that these figures do not show that Australia has been particularly anxious to give assistance to British industries in need of support? Have any representations recently been made to Australia on that subject?

Mr. Grant: I do not entirely accept everything said by my hon. Friend. I am not aware of any representations having been made in that respect.

Oral Answers to Questions — Shipbuilding Industry Board (Credits)

Mr. Douglas: asked the Secretary of State for Trade and Industry if he will give details of the total value of credits sanctioned by the Shipbuilding Industry Board for shipowners in the period October 1970 to March, 1971.

Mr. Ridley: In the period 1st October, 1970, to 31st March, 1971, the Shipbuilding Industry Board recommended applications for guarantees involving a potential liability of £89 million.

Mr. Douglas: I thank the hon. Gentleman for that answer. Will he explain why the guarantees for shipowners with orders with U.C.S. were held up apparently solely on the basis of an informal discussion between officials in his Department and the Government's director without any documentary evidence whatsoever?

Mr. Ridley: The Shipbuilding Industry Board's director who is there to watch the interests of the Board, which has invested or loaned Government money, quite rightly drew the attention of the Government to the condition of U.C.S. finances. Therefore, the Government were bound, under the legislation, to take notice whether they should continue to issue guarantees for a company whose financial viability was in question.

Oral Answers to Questions — Glasgow (Official Visit)

Mr. William Hannan: asked the Secretary of State for Trade and Industry if he will pay an official visit to Glasgow.

Mr. Lambie: asked the Secretary of State for Trade and Industry if he will visit Glasgow and address the employees of Upper Clyde Shipbuilders Limited.

Mr. Tom McMillan: asked the Secretary of State for Trade and Industry if he will pay an official visit to Clydebank.

Mr. John Davies: I visited Glasgow on 14th May. I will bear the possibility of a further visit in mind.

Mr. Hannan: Will the right hon. Gentleman go a little further and give a firm date, because thousands of trade unionists want to convey to him, in firm inelegant language, what they think of the Government's policy? In view of the accumulated evidence from some of the replies which he himself has given, and in view of the conflicting statements of the events leading up to the introduction of the liquidation, does not the right hon. Gentleman consider that the Government have been far too precipitate in this decision? Will he go to Glasgow and re-examine all the facts on the spot?

Mr. Davies: I have the advantage of the guidance of a group of experts and of the liquidator. This will provide me with a great deal of information which will be of great help. However, the truth is that the precipitate action of the Government, to which the hon. Gentleman refers, was brought about by the extraordinarily precipitate action of the company, which suddenly realised that it was in deficit without the least warning to anybody.

Mr. Rankin: When the right hon. Gentleman went to Glasgow, did he find out how many ships were being built in the shipyards in Glasgow? Is he saying that those ships which were being built, and are now being built, have no backing from the Government?

Mr. Davies: On the contrary, were it not for the Government's timely aid, the 14 ships currently being built in the yards of Upper Clyde Shipbuilders would not now be being built. The whole of the work force would have been dissipated and the work would not now be going on. The hon. Gentleman should certainly not reproach the Government for failure to act in this matter.

Oral Answers to Questions — Mercury Cell Batteries

Mr. Pavitt: asked the Secretary of State for Trade and Industry if he will now refer the manufacture of mercury cell batteries used in post-aural hearing aids to the Monopolies Commission because of increases in their price over the last 12 months.

Mr. Ridley: I would refer the hon. Member to the reply which I gave him on 1st March.—[Vol. 812, c. 301–2.]

Mr. Pavitt: I am very grateful for that reply, which shows me that we are, for the first time, having some imports from Germany, which is the only competitor to the British manufacturer. As these batteries are used heavily by deaf people and by the hospital services, would the Minister have another look at this matter with a view to doing something so that they are not only in those two hands?

Mr. Ridley: I have told the hon. Gentleman in the House on several occasions that we are watching the position very closely. If evidence is produced which suggests that a reference would be appropriate, I would not hesitate to make it.

Oral Answers to Questions — Banking (Competition and Credit Control)

Dr. Gilbert: asked the Secretary of State for Trade and Industry when he hopes to be able to announce further proposals for dealing with the bank cartel.

Mr. Ridley: I would refer the hon. Member to my right hon. Friend's reply to his Question on 14th June.—[Vol. 819, c. 7.]

Dr. Gilbert: Does the hon. Gentleman realise that now that the Treasury has come forward with this proposal for breaking up the cartel regarding interest rates, there is no excuse left whatsoever for not dealing with other aspects of the cartel's collusive practices in relation to services, charges and so on? Can we hope for some action from the hon. Gentleman's Department on this matter?

Mr. Ridley: The hon. Gentleman must await the outcome of the talks between the banks and my right hon. Friend the Chancellor of the Exchequer on the future relationship between the Government and

the banks, and then we shall see what developments take place.

Mr. Orme: Is not the Minister aware that there is public concern at the dramatic lowering of standards by British banks, especially following many of the mergers that have taken place? Something has to be done about this, and the Government have a duty to look into the matter.

Mr. Ridley: The hon. Gentleman's Administration slept on this problem for six and a half years, but my right hon. Friend has already announced plans for reforming the whole system under which banking will operate in this country.

Oral Answers to Questions — Generating Plant (Manufacturing and Installation Faults)

Mr. David Stoddart: asked the Secretary of State for Trade and Industry if he will seek powers to compensate the Central Electricity Generating Board for the additional cost of out-of-merit running of generating plant due to the late commissioning and below capacity running of 500 megawatt turbo-alternators due to manufacturing and installation faults.

Mr. Ridley: No, Sir. Consequential costs arising from the non-availability of plant are the responsibility of the C.E.G.B.

Mr. Stoddart: That answer was not unexpected, but is the hon. Gentleman aware that the C.E.G.B. has lost tens of millions of £s as a result of slow commissioning of this plant and that many of the 500 megawatt sets are still not running at full capacity? Is this not the opportunity for the Government to do something about cutting a very significant price at a stroke?

Mr. Ridley: If the C.E.G.B. has such difficulties, it is up to the Board to avoid them in the future. It would be wrong to expect others to subsidise the C.E.G.B. for purposes which are within its control.

Mr. Palmer: Are there not penalty clauses in all these contracts? Could the hon. Gentleman explain why the C.E.G.B. seems almost reluctant to invoke penalty clauses against manufacturers?

Mr. Ridley: The C.E.G.B. behaves completely commercially and properly in


this matter. I know of many occasions upon which it has invoked penalty clauses.

Oral Answers to Questions — New Firms (Scotland)

Mr. William Hamilton: asked the Secretary of State for Trade and Industry how many new firms have been established in Scotland in the last nine months; how many have been closed; and what has been or will be the net gain in jobs provided.

Mr. Anthony Grant: I regret that the precise information is not available. But in the period 1st September, 1970, to 31st May, 1971, 131 industrial development certificates were issued in Scotland which are estimated to give rise to nearly 9,200 jobs when the projects are fully manned. In the same period 110 closures of manufacturing establishments involving 8,300 redundancies were notified to the Department of Employment.

Mr. Hamilton: Can the hon. Gentleman give comparable figures for the last five or six years so that we may know the trend? Is he aware that there is enormous despondency in Scotland because of the callous policies of the Government, and that there is no sign of recovery in Scotland? On the contrary, all the signs are that things will get worse before they get better—if they get better.

Mr. Grant: On the first point, I cannot give the hon. Gentleman such lengthy figures without notice. If he puts down a Question, I shall be glad to do so. Nor do I accept the extravagant and depressing language he used. It might be worth his while to bear in mind that there has been a marked improvement in I.D.C. approvals for the area and for projects over 10,000 square feet, in project numbers, floor space and estimated additional employment for the period March-May, which are all higher than the corresponding period last year.

Oral Answers to Questions — Committee on Marine Technology

Mr. John Hall: asked the Secretary of State for Trade and Industry when the Committee on Marine Technology was first established; how much it has cost to maintain during its existence; and what have been the results achieved to date.

Mr. Corfield: The Committee on Marine Technology was established in April, 1968. Its costs amount only to an appropriate share of the salaries of the members and incidental expenses. It has no executive functions, but a number of useful studies have been completed or are in hand, some of which have already resulted in industrial project.

Mr. Hall: I do not quite follow my right hon. Friend's reply to my Question about costs. Does he think that the amount of money that has been spent on this Committee so far has resulted in value for money? Does he expect that the Committee will be able to make a useful contribution to marine technology which will justify the amount that will be spent on it in the future?

Mr. Corfield: The approximate apportionment of the cost of the salaries to which I referred comes to £8,000. Many of the projects that have been studied and which have developed into industrial projects with, we hope, commercial potential, provide a good return. Nevertheless, these are matters which are being considered in relation to the whole field of Government research.

Mr. Dalyell: What has become of the Labour Government's White Paper on marine technology?

Mr. Corfield: I think that it is probably in the wastepaper basket.

Oral Answers to Questions — Concorde

Mr. Sheldon: asked the Secretary of State for Trade and Industry if he will make a further statement on Concorde.

Mr. Corfield: I have nothing to add to the reply my right hon. Friend gave to the hon. Member on 14th June.—[Vol. 819, c. 20–21.]

Mr. Sheldon: What is the right hon. Gentleman's latest estimate of development costs for this aircraft? What is the position now about a decision on full-scale production? Is the right hon. Gentleman aware that he has promised us such a decision? What is causing the greatest anxiety is that this matter goes on and on, more money is being spent, and the decision is likely to be taken when the aircraft are on the runway waiting for a buyer?

Mr. Corfield: I cannot accept the latter part of the hon. Gentleman's remarks. As I have explained to the House over and over again, the whole problem is that no final decision to give the full go-ahead on the production programme can be given until the market is clearer. I have nothing to add on the subject of total estimated development costs to what I said on the last occasion when I addressed the House on this subject when I gave a figure of £885 million.

Mr. Adley: Is my right hon. Friend aware that United Airlines has just renewed its options on Concorde and that K.L.M. has, for the first time since the cancellation of the United States S.S.T., expressed a serious interest in the plane? Will he ensure that this interest is encouraged over the next few months which are likely to be the most difficult period before the world airlines start to place orders for the plane?

Mr. Corfield: The next few months are likely to be crucial. I entirely accept what my hon. Friend said about the airlines which are showing an interest.

Mr. Benn: When does the right hon. Gentleman expect orders? Do the Government take seriously the Press reports which came from France of an interest from China in the purchase of Concorde?

Mr. Corfield: In so far as there is any interest on the part of China it is at a very early stage and I should not like to commit myself in any way. I do not think that we can expect firm orders at any rate in the next three months.

Mr. Onslow: asked the Secretary of State for Trade and Industry what is his latest estimate of the total workforce employed on the Concorde programme in the United Kingdom.

Mr. Corfield: About 25,000.

Mr. Onslow: As my right hon. Friend will have noticed again this afternoon the anxiety of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and his hon. Friends that this project should be cancelled and all those engaged on it thrown out of work, will he repeat that figure still more loudly, for their benefit?

Mr. Corfield: Yes. Twenty-five thousand currently, rising after full production is reached to 35,000.

Mr. Leslie Huckfield: Can the Minister give me any idea of the workforce employed on the Concorde project in Coventry today?

Mr. Corfield: No. I have no breakdown from area to area, but about two-thirds are employed in the Bristol area.

Oral Answers to Questions — Unemployment (Lanarkshire)

Mr. James Hamilton: asked the Secretary of State for Trade and Industry what representations he has had from the Lanarkshire Development Council for a meeting to discuss unemployment in the county; what reply he has sent; and if he will make a statement.

Mr. Anthony Grant: The Lanarkshire Development Corporation has asked me to receive a deputation. Arrangements are being made for a deputation to be received in the near future.

Mr. Hamilton: I thank the hon. Gentleman for that reply. Is he aware that the reply that he sent to the Lanarkshire Development Council was not greeted with a great deal of enthusiasm? As in the county of Lanark 7·9 per cent. of the insurable population is unemployed, which figure does not include school leavers who have not been taken care of, will the hon. Gentleman now assure us that he will meet the premier Development Council as quickly as possible to try to give the Council an insight into what the Government's policy is for solving this very serious problem?

Mr. Grant: I am looking forward to meeting the Council and to judging its degree of enthusiasm or otherwise. I will try to arrange a meeting as soon as possible. No doubt all these matters can be discussed. At the same time we can reflect that there has been a marked improvement in I.D.C. approvals and a substantial increase in applications for local employment assistance and other financial assistance recently.

Dame Irene Ward: As I was in very early consultation with my right hon. Friend the Chancellor of the Exchequer on this very important matter, may I have an assurance that Members of Parliament of both parties will be on the deputation so that we can have a balanced consideration of this issue?

Mr. Grant: I shall always be delighted to see my hon. Friend at any time mutually convenient to us, but this meeting relates to Lanarkshire.

Oral Answers to Questions — Lockheed Aviation

Mr. Whitehead: asked the Secretary of State for Trade and Industry what plans he has to seek to give evidence before the Banking Committee of the United States House of Representatives currently investigating the proposed guarantee to Lockheed Aviation.

Mr. Corfield: The Chairman of the Banking and Currency Committee of the United States House of Representatives has asked the British Government to give evidence on this subject. He has been told in reply that we do not propose to put forward witnesses but are prepared to make a further written statement, if that would be helpful to the Committee.

Mr. Whitehead: I appreciate that we should be under no illusions as to the motives of those who may wish the Government to testify before this Committee, but is the Minister aware that the situation has changed significantly since similar requests came from the Senate Committee, first because there is now no prospect of the necessary legislation going through the two Houses of Congress before 8th August and, second, because the British Government's guarantee of further financial support for this engine and for this great project will itself run out in four weeks' time? Is the Minister therefore aware that, if he wishes to continue to have bipartisan support in the House for his efforts to rescue this engine, there must be an unequivocal statement that further support for the RB211 is forthcoming?

Mr. Corfield: The hon. Gentleman does not help his constituents or anybody else by pressing for a statement of that sort at present.

Mr. Fletcher-Cooke: Is there any precedent for the British Government giving any evidence before a Committee of either House of the American Congress?

Mr. Corfield: I believe that there are precedents where they have given evidence on purely technical matters but not on matters affecting policy.

Mr. Sheldon: Is the Minister aware that his answer to my hon. Friend the Member for Derby, North (Mr. Whitehead) was inadequate? The House has a right to ask him what he intends to do in the event of Congress not agreeing to go ahead with the loans to Lockheed. What is the Government's intention? Do they intend to carry on producing the engine, awaiting the final outcome in the United States?

Mr. Corfield: My right hon. Friend made it perfectly clear the other day that, in the event of no decision being reached on 8th August, we, together with the other parties involved—that is, the two companies and the United States Government—would get together and decide what to do collectively. That is the only sensible way of behaving.

Oral Answers to Questions — Furs and Skins (Imports)

Mr. James Johnson: asked the Secretary of State for Trade and Industry if he will make a statement regarding the extent of imports into the United Kingdom of furs and skins of the jaguar, leopard, cheetah and ocelot; and whether he will now introduce a Bill banning their import, on the lines of the Endangered Species Bill of the United States of America, a copy of which has been sent to him.

Mr. Anthony Grant: The official statistics do not show separately imports of furs and skins of the particular species mentioned. As my right hon. Friend informed the hon. Member for Islington, North (Mr. O'Halloran) on 14th June, he will consider the practicability of controlling imports of furs and skins of certain rare animals as soon as he has the necessary technical information. Powers to restrict or ban imports are available under existing legislation.—[Vol. 819, c. 3–4.]

Mr. Johnson: Is the Minister aware that the extensive and vicious commercial poaching that is going on in East Africa, South America and Asia—poaching that is encouraged by the wealthy ladies of leisure in London, who wear these skins on their backs—is connived at by Her Majesty's Government, who will not pass legislation? Will not he attempt to get


us in line with the Americans, who are doing something in this field?

Mr. Grant: The hon. Member is a little unfair to Her Majesty's Government. I banned the import of vicuna, which I think was a wise decision. We are wholly sympathetic to the needs to conserve species which are in danger of dying out. We have had meetings and have considered the representations of the British Fur Trade Association. We are sympathetic to what it does, and at the moment we are awaiting further technical information from it.

Oral Answers to Questions — Nuclear Design and Construction Grouping

Mr. Palmer: asked the Secretary of State for Trade and Industry if, in view of the continued failure of the British nuclear industry to export reactors and the inability of the generating authorities to provide enough work for two nuclear manufacturing groupings, he will take steps to revise the recommendations of the former Industrial Reorganisation Corporation and apply the recommendation of the Select Committee on Science and Technology in the last Parliament for the creation of one British nuclear design and construction grouping.

Mr. Corfield: This question is primarily one for the industrial interests involved. In any case it would be appropriate for my right hon. Friend to take account of the results of the current review of reactor programmes before forming a view on the hon. Member's suggestion.

Mr. Palmer: Does not the right hon. Member agree that the position of the nuclear reactor industry at the moment is very serious, and that, in retrospect, the Select Committee has been shown to have had considerable insight into the future? Secondly, can the Minister tell us what the Vinter Committee is, and when is proposes to report?

Mr. Corfield: I agree that the situation in this industry is very difficult at the moment, but I am sure that the hon. Member will agree that whatever foresight the Select Committee showed, it ultimately agreed that it was sensible to go for two companies instead of one. The

Vinter Committee is carrying out a purely Departmental study of reactor problems, together with the C.E.G.B. We hope that it will report in about October.

Mr. Eadie: Does not the Minister agree that the implication of this Question is that Government representatives should apologise at the Dispatch Box for making miners unemployed and for closing pits, on the false premise that nuclear power would be cheaper than coal? Will not he reconsider this question, with a view to trying to institute a real nuclear power programme, rather than continuing to fuss about as he is at present?

Mr. Corfield: It is precisely because there was so much fussing about in the past that we are having a jolly good review of the situation.

Sir H. Legge-Bourke: I do not underestimate the difficulties of coming to a decision in this matter, but will my right hon. Friend give careful consideration to the recommendation of the Select Committee on the export aspects of this problem, in respect of which it had some constructive suggestions to make?

Mr. Corfield: I accept that, but it is right to point out that in the light of the situation then ruling the Select Committee agreed with the proposals of the previous Government that two companies were most suitable in those circumstances. I agree that the matter now needs reviewing, and that is what I am doing.

Oral Answers to Questions — Charter Flights

Mr. Leslie Huckfield: asked the Secretary of State for Trade and Industry whether he will make a statement about his recent change of policy on charter flights from the United Kingdom in larger aircraft by fifth freedom carriers.

Mr. Anthony Grant: I refer the hon. Member to the reply given by my right hon. Friend the Minister for Trade to my hon. Friend the Member for Woking (Mr. Onslow) on 17th June.

Mr. Huckfield: As I am sure the hon. Member is aware, that reply was not very informative. Is he aware that it represents nothing but a few sniping shots in what is becoming a charter bilateral war with the United States? Would not he do far better by offering a more comprehensive review of charter rates and by


supporting B.O.A.C. in its endeavour to reduce fares in Montreal this week?

Mr. Grant: We are reviewing the complex position of charters. What the hon. Member says will be borne in mind, but I am not able to announce a change of policy at this moment.

Dr. Gilbert: Will the Minister take note of the extraordinary reduction of fares reported in newspaper articles? They are so far out of line with the fares on the scheduled routes that even the more respectful citizens will be tempted by them. Is the Minister aware that that is not a healthy state of affairs and that something needs doing urgently?

Mr. Grant: I accept that. We are aware of it and are reviewing the position carefully. But it is largely an international problem.

Mr. Kenneth Lewis: Can my hon. Friend say when he is likely to reach a decision that no changes are required in this matter? The situation now is becoming somewhat chaotic on both the schedule and the charter side and something should be done.

Mr. Grant: I am not in a position to say when this will be completed, but my right hon. Friend and I will take note of the urgency expressed by hon. Members on both sides of the House.

Oral Answers to Questions — Aircraft Industry (Australian Purchases)

Mr. Scott-Hopkins: asked the Secretary of State for Trade and Industry what was the value of Australian purchases of the products of the British aircraft industry in 1968, 1969 and 1970, respectively.

Mr. Corfield: £11 million, £8 million and £5 million, respectively.

Mr. Scott-Hopkins: Does not my right hon. Friend agree that those figures show a considerable drop in the last three years, and underline yet again the fact that the Australian economy in this sector is looking elsewhere than to Britain—particularly towards America—for its exports and imports?

Mr. Corfield: Yes. I believe that in this field about 80 per cent. of Australian imports come from North America and only 6 per cent. from the United Kingdom.

Mr. Russell Kerr: Is the Minister aware that many Australians' enthusiasm for British exports began to expire with the first of our series of attempts to enter the Common Market?

Mr. Corfield: There was a certain sign of their expiring at the time of the TSR2 decision.

Oral Answers to Questions — Companies Act (Review)

Mr. Costain: asked the Secretary of State for Trade and Industry what progress is being made with his review of company law.

Mr. Carter: asked the Secretary of State for Trade and Industry what progress he has made towards proposals for a revised Companies Act.

Mr. Ridley: The work is still in its early stages, but we are pressing on as fast as possible.

Mr. Costain: Is not my hon. Friend able to give us an approximate estimate in months of when it is likely to be completed?

Mr. Ridley: It is a major task, and there is a great deal of consultation and discussion to take place in the course of the review. I cannot yet give my hon. Friend any indication when we may come to a conclusion.

Mr. Arthur Lewis: Rather than review the company law, why does not the Minister ensure that his Department carries out the existing law, which it continually refuses to do? Although about 20 companies now have been milking the public, not one of the Ministers at the Department will take any action to enforce the law which is laid upon them by Statute.

Mr. Ridley: That is not the impression which a good many company directors have of my Department. I put it to the hon. Gentleman that the review of comany law to which I have referred gives him a way by which he can help constructively to improve the arrangements for the future.

Mr. Normanton: Will my hon. Friend give an assurance that in this review of company legislation he will pay particular attention to the long-standing and continuing problem caused by the way in


which the interests of minority holders of equities are prejudiced? This is a long-overdue reform, and I earnestly hope that my hon. Friend will pay close attention to it.

Mr. Ridley: I assure my hon. Friend that this is one of the matters which we are considering and which arises out of the Jenkins Committee's recommendations.

RAILWAY ACCIDENTS (WAVERTON AND SURBITON)

Sir J. Foster (by Private Notice): Sir J. Foster (by Private Notice) asked the Secretary of State for the Environment whether he will make a statement on the railway accident which occurred at Waverton, Cheshire, on 2nd July.

The Minister for Transport Industries (Mr. John Peyton): At 6.20 p.m. on Friday, 2nd July, 1971, the last two coaches of the 10-coach 5.19 p.m. school excursion train from Rhyl to Smethwick were derailed while travelling at a speed of about 55 m.p.h. approaching Tattenhall Junction, near Waverton. Both coaches struck a bridge and were extensively damaged; the last coach broke away and turned over on its side.
The train was carrying many school children. I much regret to inform the House that two of them were killed. Twenty-nine persons were taken to hospital, nine of whom, including six children, were detained.
I am sure that all right hon. and hon. Members will wish to join me in extending sympathy to the relatives of the two children who were killed and to all those injured.
One of the Department's inspecting officers of railways visited the site and found that the accident's immediate cause was a considerable buckle in the track, which was of traditional jointed construction, not continuously welded.
A public inquiry into the accident has been ordered and will take place as soon as possible.

Mr. Walden: The schoolchildren involved in the accident were from Benson Road school in my constituency. I thank the right hon. Gentleman, as I know my constituents will thank him, for his expressions of sympathy, with which I asso

ciate myself. Also, on behalf of my constituents, I thank the police and the various hospital staffs, particularly in Chester, who have done so much in this tragedy.
May I put one question to the Minister, without in any way wishing to prejudge the inquiry? If it should transpire that there is a structural fault involved here which could cause a similar occurrence somewhere else, will he ensure that urgent steps are taken to see that something is done?

Mr. Peyton: Yes, Sir. I thank the hon. Gentleman for his generous remarks. If the inquiry throws up any cause or need for action, action will, of course, be taken.

Mr. Temple: Is my right hon. Friend aware that, because there was an excellent emergency plan in operation, all the various authorities, including the voluntary authorities, were able to swing into action quickly, otherwise the casualties would have been much greater?

Mr. Peyton: Yes, Sir. I am sure that my hon. Friend's remarks will give great satisfaction to those who had an opportunity to help.

Mr. Bradley: I associate all my right hon. and hon. Friends with the right hon. Gentleman's expressions of sympathy to the bereaved and to all who were injured in this tragic accident. I am sure that it would be wise to await the outcome of the inquiry which the right hon. Gentleman has announced, but could he at this stage say whether modern coaches were involved in this incident? Second, having in mind, also, the mercifully less serious accident at Surbiton yesterday, does the right hon. Gentleman accept that there is some public concern now about the safety standards set by British Rail? Will he take this opportunity to confirm that everything possible is being done to maintain our railways' hitherto good record in this respect, in accordance with the Chief Inspecting Officer's Report and recommendations for 1969?

Mr. Peyton: I am obliged to the hon. Gentleman for what he says. The answer to his question about rolling stock is that they were modern coaches. The hon. Gentleman has rightly drawn attention to public concern. There will always be concern when accidents of this kind take place, with tragic consequences, but


I am sure that he will be the first to agree that it would be wrong to let these things get out of proportion, since British Rail has a very creditable safety record.

Mr. Fisher: My right hon. Friend has decided to hold a public inquiry into the distressing accident at Waverton. Does he intend to hold a public inquiry into the Surbiton accident yesterday, which, although mercifully without fatal consequences, totally disrupted the whole railway service in that area?

Mr. Peyton: My hon. Friend is absolutely right; this was, potentially, a very serious accident. It caused great interruption to traffic and could have had far worse consequences than it did. There will be a public inquiry.

Mr. Rankin: Will the right hon. Gentleman keep in mind also that, in a short time, we shall be running trains between London and Glasgow at 100 m.p.h? Will he bear in mind the need for the coaches to embody the greatest possible safety measures? Second, could he say whether the rails at the point of the Waverton accident were of the modern type which will carry the new fast expresses?

Mr. Peyton: I was careful to say in my original answer—indeed, I am almost grateful to the hon. Gentleman for making me say it again—that it was not continuous welded rail involved in this accident. As regards the London-Glasgow trains. I am absolutely certain that the railways will have very much in mind the need to maintain safety standards. It would be wrong to suggest that they ever fall short in the desired standard of care, and I am absolutely satisfied that no effort is spared to ensure that the public have the highest safety standards provided for them.

WAYS AND MEANS

Purchase Tax

3.38 p.m.

The Minister of State, Treasury (Mr. Terence Higgins): I beg to move,
That it is expedient to provide that the functions conferred on the Commissioners of Customs and Excise by section 6 of the Purchase Tax Act 1963 (registration, &c, of wholesalers, manufacturers and others) shall be exercisable, and, together with the corresponding functions conferred on the Commissioners by the enactments repealed by that Act, treated as having always been exercisable, by any officer of customs and excise.
I suggest, Mr. Speaker, that it would be for the convenience of the House to discuss at the same time new Clause No. 7 to the Finance Bill, "Purchase tax—exercise of functions of Commissioners with respect to registration, etc." Is that agreeable?

Mr. Speaker: If that be the wish of the House, I willingly agree.

Mr. Higgins: The effect of the Ways and Means Resolution and the new Clause to the Finance Bill associated with it is to delegate to officers of Customs and Excise the functions of the Commissioners in relation to the registration of purchase tax traders and to remove doubts as to the validity of the past exercise of those functions.
In two recent law cases, there has come to light a loophole in the machinery which, although it can be regarded as a mere legal technicality of no real substance or merit, is nevertheless a weakness in the legal basis of the tax which fundamentally affects its operation and which, I am sure the House will agree, cannot be allowed to continue.
The law cases in question concerned the prosecution by the Department of certain registered traders for failure to make returns of the tax for which they were accountable as required by Regulation 7 of the Purchase Tax Regulations, 1965. It was argued by the defence in the first case that it was necessary for the prosecution to show that the registration of the trader, which had been effected some years ago, had been carried out by an official authorised to do so.
The point here is that under the law, which is now Section 6 of the Purchase


Tax Act, 1963, the duty of registering traders is laid upon the Commissioners. They have delegated the work of registration to the Customs and Excise officers responsible for the purchase tax control of traders, and the officers' authority under that delegation is supported by Section 4(1) of the Customs and Excise Act, 1952, the relevant part of which says:
Any act or thing required or authorised by or under any enactment to be done by the Commissioners or any one of them may be done—
(c) by any other person authorised generally or specially in that behalf in writing by the Commissioners.
The question of authorisation of officers under that provision had previously been considered by the courts in a different context in 1962 and again in 1967. In those two cases a written authority under Section 4(1) had not been given, but there was no difficulty in regularising the position ad hoc. However, the opportunity was taken to consider the question of authorisation generally, and as a result a document was drawn up and signed by the then Deputy Chairman of the Board of Customs and Excise in December, 1969, which formally authorised, both generally and specially, the various grades of officer to whom have been delegated functions which in law are laid upon the Commissioners.
Unfortunately, the point at issue in the prosecution in the cases to which I have referred concerns the authority of the officer at the time when the registrations were effected, several years before the authorisation of December, 1969. The court decided in the first case that as no authority covering the officer's action had been produced, there was no evidence of registration, and the summonses were accordingly dismissed.
In the interval between that decision and the decision in the second case, a document was drawn up and signed by the Commissioner concerned which sought to ratify registrations effected before the general authority of December, 1969. But when that document was produced in the second case, the court ruled that it could not be accepted as applying in criminal cases.
Clearly, we need to resolve the situation. The great majority of the 73,000

purchase tax traders were registered before the general authority of December, 1969, and it is on the validity of that registration that most of the purchase tax revenue depends. The House will agree that the common sense of the situation is that the officers who effected the registrations were properly appointed members of the Department who had been instructed to undertake the work of registration and had been issued with a set of printed instructions. All that is missing is a document formally delegating to them the registration work which in law is laid on the Commissioners. The purpose of the Motion is to close this technical loophole in the law.

Mr. Robert Sheldon: I am in some difficulty, because the annotated copy of the 1963 Act is missing from the Library. As a result, any investigation into what the Minister has explained has not been carried out in the way in which many hon. Members wishing to consult the references would wish.
Is any prosecution now being undertaken, and will any such prosecutions be affected by the Motion?

3.45 p.m.

Mr. Charles Fletcher-Cooke: It sounds very simple to say that the delegation concerned should be allowed, and that it should be allowed retrospectively. But the question whether he is registered or not can mean a great deal to a businessman. Some who are not registered think that they should be, and some who are registered think that they should not be.
Is there any statutory appeal against refusal to register or against a registration. The Commissioners are persons of some distinction, whose judgment in the matter might reasonably be taken as final, although I am always in favour of an appeal being provided if possible. But when discretion is delegated to a great number of officers, and if at the same time an appeal is not provided for, rather different considerations arise. My hon. Friend may well reply that I should have taken that objection, if it be an objection, in 1969, when the general Order was laid, and that all we are doing now is to regularise the 1969 position by making the power to delegate retrospective. That is a very small and narrow


point, and it is not the point that I am on. That I readily concede, but if there is no provision for an appeal, does not my hon. Friend think that there should be, since delegation has taken place, and presumably will take place, pretty widely, and the discretion in future will not remain with those very distinguished and highly respected officers, the Commissioners of Customs and Excise?

Mr. Joel Barnett (Heywood and Roy-ton): Apart from the very small ones, all the manufacturers are registered, but wholesalers in particular have frequently had difficulty, in some cases where they wanted to register and were not allowed to and in others where they did not want to register but it was insisted that they should. Does the Motion indicate a change of policy? I understand that in the past the general policy was that the authorities tried to register as few wholesalers as possible. But now, in view of the impending value-added tax and the registration of large numbers, is it the intention that in the interim period before the introduction of the value-added tax—is that eventually happens—wholesalers shall be allowed to register where perhaps they might not otherwise have been able to do so?

Mr. Higgins: I understand that there are no cases of the kind which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) suggested would be affected by the change. I am sorry about the difficulty which the hon. Gentleman had in the Library. I did not have notice of his

question, but to the best of my knowledge no cases will be affected, and I understand that the two cases to which I referred will not be affected by the change either.
I stress in answer to my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) that the purpose of the Motion is simply to maintain what had always been thought until recently to be the position. Therefore, it is not what happened in 1969 which is relevant to the question of appeal but what exists in the relevant legislation, and the Clauses to which I referred are particularly concerned with registration. I understand that there is no provision for appeal as such, but an action can be brought in the courts if someone is dissatisfied with the situation.
We are receiving representations from all interested parties on the question of the value-added tax in the light of the Green Paper. I cannot give the hon. Member for Heywood and Royton (Mr. Barnett) an off-the-cuff answer to the specific point he raised, but I will look into it.

Question put and agreed to.

Resolved,
That it is expedient to provide that the functions conferred on the Commissioners of Customs and Excise by section 6 of the Purchase Tax Act 1963 (registration, &c., of wholesalers, manufacturers and others) shall be exercisable, and, together with the corresponding functions conferred on the Commissioners by the enactments repealed by that Act, treated as having always been exercisable, by any officer of customs and excise.

Orders of the Day — FINANCE BILL

Not amended (in the Committee) and as amended (in the Standing Committee), considered.

3.50 p.m.

The Chief Secretary to the Treasury (Mr. Maurice Macmillan): I beg to move,

That on Consideration of the Finance Bill any amendments relating to the Clauses and

New Clause 35

CLAIMS FOR DEFERMENT OF PART OF SURTAX FOR 1972–73

(1) A person chargeable to surtax for the year 1972–73 may claim to be allowed to defer payment of two-thirds of that surtax or, if his income includes income which has borne tax by deduction, two-thirds of so much of that surtax as is attributable to his other income.


5
(2) One half of any amount deferred under this section (that is to say one-third of the surtax) shall be payable on 1st January 1975 instead of on 1st January 1974 and the other half on 1st January 1976.



(3) For the purposes of this section—


10
(a) income which has borne tax by deduction is income from which tax at the standard rate has been deducted (otherwise than in pursuance of section 204 of the Taxes Act (pay as you earn)) or is treated as having been deducted; and



(b) the amount of surtax attributable to a person's other income is the surtax to which he would be chargeable if his other income, reduced by any deductions under section 28 of the Taxes Act, were his only income; and


15
(c) any reductions of his total income attributable to any provision other than section 28 of the Taxes Act shall be treated as first reducing income which has borne tax by deduction; and


20
(d) where, in the case of a husband and wife, an application under section 38(2) of the Taxes Act (separate assessment to surtax) or an election under section 20 of this Act has effect, the amounts that may be deferred by them respectively shall be ascertained, in accordance with the preceding provisions of this section, by reference to the surtax to which each of them is chargeable and to the income in respect of which that surtax is chargeable.


25
(4) A claim under this section shall be made to the Board but shall not be allowed by the Board unless it appears to them that the amount to be deferred is £100 or more and is not in dispute—[Mr. Barber.]

Brought up, and read the First time

The Chancellor of the Exchequer (Mr. Anthony Barber): I beg to move, that the Clause be read a Second time.

Mr. Speaker: I understand that it would be convenient to discuss at the same time sub-Amendment (a), in line 25, leave out 'and is not in dispute', standing in the name of the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and Government Amendment No. 15.

Mr. Barber: If you please, Mr. Speaker.

Schedules be considered in the following order of Clauses and Schedules, namely, Clauses 1 to 8; Schedule 1; Clauses 9 to 17; Schedule 2; Clauses 18 and 19; Schedule 3; Clause 20; Schedule 4; Clauses 21 to 28; Schedule 5; Clauses 29 to 36; Schedules 6 and 7; Clauses 37 to 47; Schedule 8; Clauses 48 to 52; Schedule 9; Clause 53; Schedule 10; Clause 54; Schedule 11; Clauses 55 and 56; Schedule 12; Clauses 57 to 63; Schedule 13; Clauses 64 and 65; Schedule 14.

I hope that this proposed ordering of the new Clauses and Schedules, Mr. Speaker, is satisfactory to the House. It follows previous practice.

Question put and agreed to.

New Clause 35 seeks to replace Clause 21 and deals with the problem of overlapping tax, which is inherent in any proposal for unification of income tax and surtax. Clause 21 as it stands allows a surtax payer to defer for one year payment of half the 1972–73 surtax which is attributable to his earned income and interest is to be charged on any surtax so deferred from the normal due date, 1st January, 1974. I think it is recognised on both sides of the House that in many cases Clause 21 as it stands will provide no particular difficulty and


that in many cases also the taxpayer in any event would not wish to defer the payment of this surtax. [Laughter.] Well, he might wish it. We would all wish it. But I think that quite a number of taxpayers would, even under Clause 21 as it stands, find no particular difficulty. On the other hand, representations have been made to us which have convinced me that in some respects Clause 21 is too harsh. The result of these representations and of our considerations is new Clause 35.

The grounds of criticism which were put to me fell under three heads. First, there was the complaint about the repercussions of the deferment on earned income. I think that this is a justifiable complaint. Certain investment income from, broadly speaking, rent and interest—for example, bank deposit interest—will result in overlapping tax payments when received by the surtax payers. The assessment made for 1973–74 in respect of such income payable on 1st January, 1974, will extend to the full scale of the unified rate, but the 1972–73 surtax will also be due on 1st January, 1974, on such income.

The case for spreading the 1972–73 surtax attributable to Schedule A income has been particularly strongly pressed and the argument is that, for practical purposes, the recipients of rental income are as badly affected by overlapping tax problems as are income tax earners. The problem for the owners of agricultural estates, for example, is especially difficult, in that they are currently being urged to spend large sums on capital improvements, drainage works and so on, and these tax payments would denude them of capital. There is a great deal in that argument.

The second ground of criticism concerns the period of the spread as it is set out in Clause 21. It is said that the period of the spread in Clause 21 is inadequate. It has been maintained that the liquidity problems posed for surtax payers by overlapping tax liabilities have been under-estimated and that a deferment for one year only would not go far enough to meet the difficulties. As I have said, I do not doubt that in the case of many taxpayers there would be no particular difficulties. On the other hand, I have been convinced by particular examples brought to my attention that

there would be considerable difficulties for some.

The third ground of criticism concerns the charge to interest. The interest charged in the circumstances of these cases has been the subject of particular criticism. In the reply which my hon. Friend the Chief Secretary made when this matter was considered in Standing Committee, he gave a general undertaking to look again into these matters in the light of the arguments and to bring forward proposals on Report to meet any criticisms which, on further reflection, we considered justified. I therefore decided that, as there was considerable substance in these various criticisms, a new Clause should be put down to replace Clause 21, and this goes a considerable way to meet the criticisms.

Under new Clause 35, part of the 1972–73 surtax referable to the whole of the taxpayer's income other than income subject to deductions of standard rate tax at source may be deferred. So Schedule A, among other things, will, for example, qualify for spreading. This should go a long way to meet those critics who have argued that spreading should not be confined solely to surtax on earned income.

Secondly, surtax which qualifies for deferment will be payable in three equal instalments—on 1st January, 1974, 1st January, 1975, and 1st January, 1976–instead of in the two instalments proposed in Clause 21 as it stands.

Thirdly, the interest charged will be dropped. Of course, interest will be payable under the ordinary rules from the new deferred due dates if payment is not then made within the prescribed period.

It might be helpful if, at this point, I refer to sub-Amendment (a) because I think that there is some genuine misunderstanding about the meaning of the words
… and is not in dispute.
which my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) seeks to delete. Section 29(2)(b) of the Taxes Management Act, 1970, allows the Board to make a surtax assessment to the best of its judgment when a taxpayer has failed to make a return or when the Board is dissatisfied with the return. The purpose of the sub-Amendment is to deny the privilege of


spreading when an estimated assessment has been made in such circumstances.

The words which my right hon. Friend seeks to omit—and this is important—will not rule out deferment simply because a taxpayer has appealed against an assessment so that the tax is in dispute. The reason is that so long as the appeal is unsettled the tax charged under the assessment is not payable anyway. But once the appeal has been disposed of so that the tax is no longer in dispute, deferment can be claimed provided the other conditions of new Clause 35 are satisfied.

It could happen that there is an appeal relating to some part of income included in an assessment although there is no dispute over the remainder. In these circumstances, the Special Commissioners may order that the tax not in dispute should be paid notwithstanding that appeal on the other matters is outstanding, and if the conditions for deferment are met, the appropriate proportion of such tax may be deferred. It may well be that my right hon. Friend has not appreciated that tax under appeal is not payable anyway until the appeal is settled, and, once it is settled, deferment will be available if the other conditions are satisfied.

4.0 p.m.

I add only one observation which seemed to me to be important when the full significance of these words was explained to me. When one talks in these terms of an assessment being under appeal, that means in many cases simply that a notice of appeal has been given. Those of my hon. Friends and hon. Members opposite who are concerned with these matters will know that in normal circumstances the Inland Revenue considers as a notice of appeal a letter from the taxpayer or his advisers challenging the assessment. In other words, that letter is taken as a notice of appeal, so that in those circumstances the assessment would be under appeal, and thus the words to which my right hon. Friend's Amendment refers would become operative in the way I have described.

For all those reasons, it seems reasonable that these words should be included. I hope that my right hon. Friend will be satisfied with that explanation and

will not seek to press his Amendment to a Division.

Mr. John Boyd-Carpenter: Those of us who criticised Clause 21 were naturally very glad to see Amendment No. 15 to remove it. It would be ungrateful not to say that my right hon. Friend's new Clause is a considerable improvement, from the taxpayers' point ow view, and ordinary fairness, on Clause 21.
But I thought that my right hon. Friend was, for him, a little disingenuous when he said that some such Clause was inherent in any change to a single tax system. It is only inherent in the method which he himself has adopted for making that change. As I ventured to point out on Second Reading, it is my right hon. Friend's decision to retain a tax which, while assessed on the basis of 1972–73 income, is payable and collectable only in 1974, a year in which my right hon. Friend will also be collecting, through P.A.Y.E., the higher rate of income tax. It is his decision to make the transition in this way which has produced the difficulties which his own new Clause, as did Clause 21, seeks to mitigate.
In thanking my right hon. Friend for mitigating some of the punishing effects on the taxpayer which he himself decided to inflict, I hope that I shall not be thought to believe that my right hon. Friend is going the right way about making the transition. The very fact that he has, first, put Clause 21 into the Bill and, secondly, in the light of criticisms, mitigated it, is surely an acceptance on his part that his method of making the transition is unfair and oppressive.
It springs simply from what, with all respect to the Inland Revenue, is its professional delusion that surtax for 1972–73 is, from the point of view of the taxpayer, tax payable in that year, whereas, from the point of view of the taxpayer, surtax in respect of 1972–73 is 1974 tax, which is when the impact falls and the taxpayer has to pay it.
I am sorry that my right hon. Friend has not so far gone the whole hog and taken the line that as he is collecting whatever higher rate of income tax he decides in 1974, the right thing would be to cancel out surtax for 1972–73, which would have the incidental advantage of


enabling him to get rid of the Surtax Office a year earlier, with the consequent administrative saving. My gratitude to my right hon. Friend for doing away with the oppressive interest provision of Clause 21 and the insertion of the three-year deferment provision is tempered by the fact that even the new Clause is only an attempt to make the best of what sems to be a fairly bad job.
I come now to my Amendment. I was naturally interested in my right hon. Friend's explanation. I will admit that I had not appreciated that the words "and is not in dispute" meant that no problem could arise when an appeal had been entered. But I am less clear from my right hon. Friend's explanation about the position if an argument, which could not yet be construed as a formal appeal, or even the letter which he mentioned, were taking place between the taxpayer and the Inland Revenue.
For example, if there is a genuine difference of view, which accountants ate trying to sort out, between the taxpayer and the Revenue, if these words stay in the Bill, will it be impossible for an application to spread—whatever the final sum may be—to be put in by the taxpayer? My right hon. Friend's assurance was perfectly clear when an appeal or anything that could be construed as an appeal had been entered no problem could arise, because until that appeal was disposed of, no tax was payable. But if there is simply a discussion or informal argument as to the precise quantum of surtax due, and, as my right hon. Friend knows, that is apt to happen with complicated estates, with these words in the Clause, is an application to spread prevented?
Equally, what is the position when an appeal has been put in and, within the three-year spread period, it has been decided one way or the other, possibly after one and a half years? I take it that an application to spread could then be put in, but I should welcome such an assurance.
Finally, I was very interested in my right hon. Friend's reason for this. He told us that it was his purpose to prevent an application to spread when the Revenue had imposed an estimated assessment because of its difficulties in getting a return. It therefore seems that the purpose of these words is to add to the

pressure on the taxpayer in such a case. The taxpayer is not only to be exposed to the risks of an estimated assessment, with all the inconvenience that that may cause, but to be denied a spread at any time in the course of his discussions with the Revenue.
I wonder whether that is fair or necessary. I know that my right hon. Friend will say that an estimated assessment is imposed only when, from the Revenue's point of view, the taxpayer is at fault, but there may be occasions, for example, when an estate or trust is being valued slowly and with difficulty and when great confusion exists, when, with the best will in the world, it will not have been possible for those responsible to put in the proper tax returns. There are cases when estimated assessments may be imposed quite lawfully without there being at any rate any serious fault on the part of the taxpayer.
I do not see why in such a case taxpayers should be denied any opportunity whatever of applying for the spread which my right hon. Friend has accepted as necessary to be open to other surtax payers in this situation in connection with a tax transition for which he is responsible. Therefore, while I was glad to have my right hon. Friend's assurance about cases in which an appeal was entered, I am still unhappy about why there should be an automatic denial of spread in all estimated assessment cases, meritorious or unmeritorious. I am a little uncertain about what happens when there is argument and discussion as to the amount of surtax due both in the period before a formal appeal is entered, or is deemed to be entered, and after such an appeal has been disposed of. I confess that at the moment I should be much happier if the words were not in the Bill, but I should like to hear a further explanation.

Sir John Foster: I ask my right hon. Friend the Chancellor of the Exchequer to take out some of the negatives and to deal with the new Clause in a positive way.
Subsection (4) provides that the Board shall not allow a claim to spread if the amount is in dispute. That sounds very odd. Is it possible to distinguish between a dispute which is an appeal and a dispute which is not? Can my right hon. Friend give an instance in which it is


fair that a claim to spread should not be allowed because the taxpayer is disputing in some way which is not an appeal? Looked at in a positive way, it is not justifiable, and certainly does not seem justifiable to a non-lawyer and a person of common sense, to say that a claim will not be allowed if it is in dispute but it will be allowed if it is not in dispute.

Mr. Joel Barnett: I cannot help feeling that the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) is making rather heavy weather of the new Clause. It is reasonably clear that if a matter is under appeal the taxpayer is not suffering any more than he is if it is not under appeal. Admittedly he cannot spread, but he is in a better position: he does not pay at all. I should be prepared to accept the explanation of the Chancellor of the Exchequer.

Mr. Boyd-Carpenter: The words used are, not "subject to appeal", but "in dispute". As my hon. and learned Friend the Member for Northwich (Sir J. Foster) said, this must mean that there can be cases in which there is no appeal but there is dispute.

Mr. Barnett: When it comes to the legal interpretation of words, I defer to the right hon. Gentleman and to the hon. and learned Member for Northwich. (Sir J. Foster). But, from a purely tax point of view, I have had no difficulty about deciding with the Revenue when a matter is under appeal. A letter to the Revenue saying that one does not accept a particular part of a surtax assessment is good enough. But if the right hon. Gentleman is right in his legal interpretation and that the new Clause may not be interpreted in the way indicated by the Chancellor of the Exchequer, I agree that it will be necessary to amend the Clause. But if the Chancellor's interpretation is correct, the taxpayer will be at least as well off because he is not obliged to pay the surtax.
Despite what the Chancellor of the Exchequer said, the general Revenue interpretation is that when an assessment, whether for income tax or surtax, is under appeal, the collectors of taxes do not say, "We will wait until it is all

settled." They are generally instructed, in no uncertain terms, to apply for a substantial amount on account. But most taxpayers do not appreciate that they are not obliged to pay, although the collector of taxes tends to be rather pressing, even when a case is under appeal.
4.15 p.m.
I refer to the main point made today by the right hon. Member for Kingston-upon-Thames which he made when the matter was last debated on the Floor of the House. He indicated that the method proposed by the Chancellor of the Exchequer was unfair. He said that it was a "professional delusion" because the tax arose in 1972–73 and did not become payable until 1974. He said that in those circumstances the whole of it should be relieved because in that year the unified tax would be paid. The implication behind his words was that it was unfair because the taxpayer paid the tax twice. That strictly is not true. The taxpayer pays twice in one year, which is very different. If the taxpayer were relieved of the tax, it would be a very substantial concession; it would not be a minor concession. It would be a relief of £300 million of surtax. The Bill, as I am sure my hon. Friends will agree, has been more than kind to people at that end of the tax paying scale. Therefore, it is not unfair in any sense of the word to insist that that tax shall not be totally relieved.
In practice, with surtax being paid in arrears, there is at least one year's surtax owing at death. If the whole of that one year's surtax were relieved, not only would it be a major concession, but I suppose that one could argue that it would be a concession to beneficiaries of estates. Surtax which became payable at death would, in most cases, no longer be payable under the unified tax system. The implication behind the words of the right hon. Member for Kingston-upon-Thames was that it was unfair to relieve these people of the surtax. In my view, it is not unfair. On the contrary, it would be grossly unfair to other taxpayers if surtax payers were relieved of this amount of surtax—£300 million.
I agree that my first impression of Clause 21 might have stemmed from the fact that I was personally involved in having to pay the tax and that it seemed very hard to have to pay two lots in


one year—and, incidentally, in a very interesting year, 1974. Surtax payers might feel that paying that extra amount in surtax would be a good reason for putting crosses in places other than on income tax forms. If the payment of the tax were cancelled altogether, while it might be very nice for me personally, it would be grossly unfair generally. I accept the new Clause, with its not unreasonable further concession to surtax payers.

Mr. Barber: I am grateful to my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) for his kind words and for recognising that I have gone some way towards meeting those who believed that the provisions of Clause 21 were too stringent. I know full well the arguments which my right hon. Friend has adduced previously about the way in which one might deal with the problem of the overlapping of surtax which is inherent in any proposal for unification. My right hon. Friend is right if one takes the view that it would be reasonable to cancel altogether one year's payment of surtax.
I have heard these arguments deployed before and, naturally, I have considered them, but I do not believe that I should be justified in adopting that remedy, which would certainly avoid the sort of problems which my right hon. Friend and others have had in mind. I therefore came to the conclusion that the best thing I could do was to put forward provisions which would alleviate the situation in a reasonable way. Although I may not have gone as far as some of my right hon. and hon. Friends would have wished me to go, I hope that they will agree that, in conjunction with my hon. Friends who served on the Committee upstairs, I have gone quite a long way to meet the objections raised under the three heads which I mentioned. I take the point which my hon. and learned Friend the Member for Northwich (Sir J. Foster) made about the wording. It is always difficult on Report to consider looking again at the wording. I shall, therefore, deal with the substance of what he and my right hon. Friend said about the words in the Amendment.
The way in which deferment is operated is not dependent on there being a

formal appeal. If a taxpayer says to the inspector that he does not agree with the assessment, the matter is then treated by the Inland Revenue as an appeal. Once an assessment is under appeal the tax is not payable in any event. When an appeal has been decided, where a dispute has been resolved, then the spreading provisions apply. My right hon. Friend asked for an assurance on that particular point.
I referred in my opening remarks to certain circumstances in which the Inland Revenue would consider it right to make an estimated assessment. Suppose a taxpayer has made no return of income, done absolutely nothing to co-operate with the Revenue, the Revenue has only one course open to it, and that is to make an estimated assessment.
Even in these circumstances, on receipt of the estimated assessment, if the taxpayer then says, "I do not believe that this assessment is justified", that would be treated as an appeal, and because it is treated as an appeal the tax which might otherwise be payable would not be payable until the dispute had been settled.
I looked at my right hon. Friend's Amendment with great care, because I wanted to make sure that it would not operate unfairly in any of the sorts of cases mentioned. I am satisfied that it will operate in a fair way, and I hope that he will accept what I have said and the assurances I have given.

Sir J. Foster: Can the Chancellor give an instance of a dispute where no spreading is allowed other than on appeal where no spreading is required as no tax is payable?

Mr. Barber: I regret that I cannot offhand give such an instance. But in those cases where there is a dispute between the Revenue and the taxpayer, that dispute will, in normal circumstances, be treated as an appeal and, therefore, once the dispute is resolved the spreading provision will apply. Whatever the answer is to that point, there are no circumstances in which this could operate to the taxpayer's disadvantage.

Question put and agreed to.

Question read a Second time, and added to the Bill.

New Clause 7

PURCHASE TAX—EXERCISE OF FUNCTIONS OF COMMISSIONERS WITH RESPECT TO REGISTRATION, ETC.

The functions conferred on the Commissioners of Customs and Excise by section 6 of the Purchase Tax Act 1963 (registration, etc., of wholesalers, manufacturers and others) shall be exercisable, and, together with the corresponding functions conferred on the Commissioners by the enactments repealed by that Act, treated as having always been exercisable, by any officer of customs and excise.—[Mr. Higgins.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

DOUBLE TAXATION RELIEF FOR UNDERLYING TAX

(1) Part XVIII of the Taxes Act (double taxation relief) shall be amended as follows.

(2) For section 508 (extension of relief to United Kingdom and third country taxes) there shall be substituted the following section:—
508.—(1) Where a company resident outside the United Kingdom (in this section referred to as 'the overseas company') pays a dividend to a company resident in the United Kingdom (in this section referred to as 'the United Kingdom company') and the overseas company is related to the United Kingdom company, then, for the purpose of allowing credit under any arrangement against corporation tax in respect of the dividend, there shall be taken into account, as if it were tax payable under the law of the territory in which the overseas company is resident,—

(a) any United Kingdom income tax or corporation tax payable by the overseas company in respect of its profits; and
(b) any tax which, under the law of any other territory, is payable by the overseas company in respect of its profits.

(2) Where the overseas company has received a dividend from a third company and the third company is related to the overseas company, then, subject to subsection (4) below, there shall be treated for the purposes of subsection (1) above as tax paid by the overseas company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account under this Part of this Act if the dividend had been paid by a company resident outside the United Kingdom to a company resident in the United Kingdom and arrangements had provided for underlying tax to be taken into account.

(3) Where the third company has received a dividend from a fourth company and the fourth company is related to the third com

pany, then, subject to subsection (4) below, tax payable by the fourth company shall similarly be treated for the purposes of subsection (2) above as tax paid by the third company; and so on for successive companies each of which is related to the one before.

(4) Subsections (2) and (3) above are subject to the following limitations—

(a) no tax shall be taken into account in respect of a dividend paid by a company resident in the United Kingdom except United Kingdom corporation tax and any tax for which that company is entitled to credit under this Part of this Act; and
(b) no tax shall be taken into account in respect of a dividend paid by a company resident outside the United Kingdom to another such company unless it could have been taken into account under the other provisions of this Part of this Act had the other company been resident in the United Kingdom.

(5) For the purposes of this section a company is related to another company if that other company—

(a) controls directly or indirectly, or
(b) is a subsidiary of a company which controls directly or indirectly,

not less than 10 per cent. of the voting power in the first-mentioned company.

(3) In section 498(4) for the words from 'not less than 25 per cent.' to 'of the Commonwealth territories' there shall be substituted the words 'not less than 10 per cent. of the voting power in the company paying the dividend'.

(4) In section 507, in subsection (1), for the words '25 per cent.' there shall be substituted the words '10 per cent.' and subsections (2) and (3) shall be omitted.

(5) This section has effect with respect to dividends paid (within the meaning of section 527(3) of the Taxes Act) on or after 1st April 1971.—[Mr. Patrick Jenkin.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Patrick Jenkin): I beg to move, That the Clause be read a Second time.
It would be for the convenience of the House if I dealt with the matter fairly briefly as I do not anticipate that there will be any matters of contention arising. You have indicated, Mr. Speaker, that we can also take new Clause 31–

Extension of unilateral relief from double taxation

In subsection (4) of section 498 Income and Corporation Taxes Act 1970 (Unilateral relief for double taxation) after the first mention of the word 'territories' and before the word 'any' insert the words: 'or holds an investment in the equity of the first mentioned company, the cost or market value whereof


at any time during the second company's chargeable accounting period is at least £1 million'.
If I may, I will catch your eye again at the end of the debate so that I may reply to any points made relating to that Clause.

New Clause 12 refers to the entitlement of companies with investments overseas to relief for what is called underlying taxation, that is, the company tax paid by the foreign associate. Hitherto there have been a number of different provisions, depending on the country in which the overseas associate is operating and allowing different percentages of shareholding which entitle the United Kingdom company to claim relief for the underlying tax. This Clause implements the intention which the Government set out in the White Paper entitled "British Private Investment in Developing Countries", Cmnd. 4656 published in April of this year. There we said that we felt that with
… the growth of consortium investment and local participation in many developing countries, there is a case for extending the lower 10 per cent. limit more widely. The Government will be proposing an amendment to the Finance Bill accordingly.

The Clause goes further than the White Paper. It first replaces the 25 per cent. test with the 10 per cent. test in all cases. There would be very few 25 per cent. cases left if we merely eliminated them from developing countries. Secondly, we are putting on the Statute Book in an extended form what has hitherto operated as an Inland Revenue concession designed to deal with cases where voting control was held through a chain of companies. This does not alter the practice but we are constantly under pressure from the Public Accounts Committee to put into statutory form those arrangements which have operated sometimes over many years as concessions. I think the House will applaud the fact that we have taken this opportunity to write this concession into the Statute Book. This forms the bulk of the Clause.

I was intrigued to look up the record on the 10 per cent./25 per cent. point. I find that it is five years ago almost to the day when from the other Dispatch Box I suggested to the then Government that the time had come for the elimination of what I called the few isolated cases where the 25 per cent. is the rule.

Mr. Niall McDermot, one of my predecessors as Financial Secretary, replied:
I do not say that there will never come a day, when we have renegotiated these new agreements, when what is left of the unilateral system may not be adjusted to a level different from the prevailing one, but I do not think that this is the moment to seek to make such an adjustment."—[OFFICIAL REPORT, 21st June, 1966; Vol. 730, c. 521–2.]
In the view of the Government the time has come to make this change.

4.30 p.m.

Mr. William Clark: I congratulate and thank my hon. Friend for introducing this new Clause. I would like to refer to the 10 per cent. holding because in many cases there can be a company which invests in an overseas company and has an initial 10 per cent. holding under which it qualifies for relief. Sometimes the overseas company may have a rights issue or a new share issue and the investment of the British company is diluted so that it is less than 10 per cent. Has the time not arrived for us to write into the Bill a figure of investment? In new Clause 31 I have suggested a figure of £1 million cost or market value. I am not wedded to the figure of £1 million. It could be less. It could be £250,000. I hope, however, that the point can be looked at because although a company may start with a 10 per cent. holding it might be that the 10 per cent. is diluted by an issue of shares in a company, where a British company has little say despite the fact of the 10 per cent. holding.

Mr. Dick Douglas: I do not want to detain the House unduly on this new Clause, but there are one or two questions I should like to put. As the Minister has indicated, it extends certain provisions beyond the field of developing countries and I wanted to ask whether it in any way involves reciprocal arrangements particularly with European countries if existing members of the E.E.C. should develop with developing countries arrangements similar to the type of arrangements under the Clause.
Secondly, how does the Minister see the investigating procedures to ascertain the reduction from the 25 per cent. voting control?

Mr. Patrick Jenkin: Perhaps I may be allowed to deal first with questions of


the hon. Member for East Stirlingshire (Mr. Douglas). He is quite right when he implied that one of the factors which would determine the Government's view whether to accord the 10 per cent. test rather than the 25 per cent. would have been whether in the course of negotiations of double taxation conventions it would have been possible to ensure corresponding advantage to this country. The passage I read from Mr. MacDermot's speech indicated that while there were a great many of these agreements still to be negotiated the then Government did not feel it right to take this step. In many cases, we were able to negotiate 10 per cent. and get something for it in return. In others, we were not. We have taken the view that there would be scant prospect of getting anything further now, and, therefore, it would be right that we should make a rule universally rather than have very few cases left over where the 25 per cent. or, indeed, another test, might operate.
I would insert in parenthesis that the Republic of Ireland is a special case where special rules apply. This is not affected by the new Clause.
On the hon. Gentleman's second point about the investigating procedures, I do not think there would be anything new here. The Revenue will have to be satisfied that the necessary 10 per cent. voting control is exercised before giving the United Kingdom shareholding company relief for underlying tax. I do not anticipate any difficulty here.
I come to the point raised by my hon. Friend the Member for Surrey, East (Mr. William Clark). This is one which, naturally, he will realise, if he has studied the record, Ministers would have considered most carefully, because when we were in Opposition we advanced, both in the House and in the Committee, a similar proposition on the grounds that if one were going to draw a distinction between what one might call trading investment and portfolio investment, it would perhaps, so the argument runs, be unreal to continue to a voting test. There must be cases where less than a 10 per cent. shareholding could nevertheless be described as a trade investment. It would be unfair that the investment should be denied relief for underlying tax.
The point my hon. Friend made is, what of the case which starts with more than 10 per cent. and perhaps by a rights issue the United Kingdom shareholding company share is reduced and is not able to take up a share below 10 per cent.? The argument always advanced against this by our predecessors, and one which does seem to me to have a good deal of force in it, is that if one were to take the test, whether it be £1 million, as my hon. Friend mentioned, or £250,000 as he has also mentioned, inevitably one is drawing a distinction between a big company to the disadvantage of a small company. If one is going to allow a big company with less than 10 per cent. holding relief for underlying tax, the small company might even have a bigger share of the equity than a large company, and would be denied it.
Inevitably one would be creating new anomalies, anomalies, perhaps, different from the sort which exist already under the 10 per cent. rule, but, at the same time, it would be even more difficult to defend—for instance in the case which my hon. Friend mentioned of a rights issue which a United Kingdom shareholding company does not take up. It is not immediately obvious that it would be easier for a small company to take up a rights issue in an overseas company than it is for a big company. Indeed, many people might think that the opposite is the case. By putting in an absolute amount, £1 million or what have you, we would be emphasising the advantage which a big company would already have to the detriment of the small company. Therefore I have been convinced by the arguments that it would be wrong to depart from the usual test which I think is almost universally applied in double taxation conventions throughout the world, the distinction between direct and portfolio investment, namely, by reference to the voting control.
As I indicated earlier, we are refining this and making statutory extra statutory concessions with the definition of voting control. We are now making the 10 per cent. rule universal, and I think this is right.
These are matters which will fall to be considered in the light of Corporation tax reform. I should not like anyone to think that the changes foreshadowed in the


Green Paper are likely to lead to any significant changes in taxation of portfolio investment. It would be wrong to leave the House with any such impression.
I hope that, in the circumstances, my hon. Friend will think it right not to press his Amendment.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 21

TEMPORARY RELIEF FROM IMPORT DUTY FOR CERTAIN COMMONWEALTH TEXTILES

Schedule 3 to the Import Duties Act 1958 (which lists descriptions of goods in respect of which, subject to certain specified conditions, orders may be made providing for relief from import duty) shall be amended by adding the following paragraph after that added by section 1(4) of this Act—

11. The following goods, that is to say, cotton yarn and manufactures of woven cotton, may be relieved from import duty if—

(a) they are goods of the Commonwealth preference area, and
(b) they are imported on or after 1st January 1972 under the authority of an import licence which restricts the quantity of goods which may be imported there-under, and
(c) the Secretary of State certifies that he is satisfied that they were exported from their country of origin before the said 1st January, and
(d) import duty would not have been chargeable on them if they had been imported on 31st December 1971.—[Mr. Noble.]

Brought up, and read the First time.

The Minister for Trade (Mr. Michael Noble): I beg to move, That the Clause be read a Second time.
The new Clause amends the Import Duties Act, 1958, to provide a new limited power for import duty relief. The need for this new power arises from our intention to go ahead with the previous Government's decision to impose a tariff of 85 per cent. of the most favoured nation rate on imports of cotton yarn and woven cotton articles from the Commonwealth Preference Area arriving in this country on or after 1st January, 1972.
The present import restrictions on the quantities of those goods exported from the developing countries will be discon

tinued at the end of this year. Because the quota restrictions are operated on the basis of the date of export, while the tariff must be related to the date of arrival, goods exported under quota from the Commonwealth Preference Area before the end of this year but arriving early next year would, unless the proposed power is enacted, be subject to both quantitative restraint and the tariff. To avoid this double penalty Commonwealth suppliers would have a strong incentive to ship all the quota entitlement to arrive before the end of this year, thus producing a lumping of imports which might dislocate the market. To prevent this risk of dislocation we propose to relieve such goods from import duty in the early part of 1972. The new Clause would give us the power to do so. The power will be needed only for the first few months of that year.
The Clause is purely enabling. It adds a further paragraph to Schedule 3 to the Import Duties Act, 1958, which lists a series of cases where relief from import duty may be made available by order under Section 5 of the Act. The necessary order will be made in due course subject to negative resolution procedure in accordance with the existing provisions of Section 5. The power is only available for cotton yarn and manufactures of woven cotton. The relief is deliberately restricted by sub-paragraph (a) to goods of the Commonwealth Preference Area, by sub-paragraph (b) to goods imported under a licence restricting the quantity to be imported, and by sub-paragraph (d) to goods of a kind which would have been admitted duty-free had they been imported on 31st December, 1971. Only goods complying with all these conditions would, unless relief were given under the Clause, became temporarily subject to the new double restraint of quota control and import duty.
In particular, sub-paragraph (b) excludes goods from Commonwealth countries which have not been subject to quota restriction, while sub-paragraph (d) excludes all goods, Commonwealth and non-Commonwealth alike, which are already subject to tariffs as well as quota restrictions.
In addition, sub-paragraph (c) makes the key provision that the goods first have to be certified by the Secretary of State—in practice, the Department of Trade


and Industry—to the effect mat he is satisfied that they were exported before the end of this year. Relief is intended only for goods exported under the current quotas up to the end of this year, and this sub-paragraph precludes relief for goods exported thereafter. Certification will be based on evidence of the date of export which has to be submitted to the Department of Trade and Industry before it issues import licences under the current quota controls. H.M. Customs and Excise needs such certification so that it can be satisfied as to the eligibility of the goods for duty relief.
A further effect of sub-paragraph (b) is that the power will effectively lapse when we cease to issue for the cotton textiles concerned individual import licences which embody quantitative restrictions, that is to say, as from 1st April, 1972, although such licences will in any case be issued freely for goods exported as from 1st January, 1972.

Mr. Tam Dalyell: As the right hon. Gentleman knows, there is no cotton industry in Argyll and the Islands, or even in West Lothian. Therefore, in the presence of colleagues who represent cotton constituencies, I feel a little constrained about speaking on this subject. I do so simply to ask a question. I gather that the Indian Government are greatly dissatisfied at various developments which have taken place. What consultations has the Department had, through the Foreign Office, with the Indian Government, and what is the general philosophy of putting a certain constraints on imports of manufactured goods that can be produced by developing countries, which is perhaps a better way of giving finance to developing countries than outright aid? The House might be grateful for a short statement on the basic philosophy.

Mr. Barnett: Unlike the constituency of my hon. Friend, my constituency has a considerable textile interest. I appreciate the need for arrangements for the transitional period between quotas and import duties. My hon. Friend referred to India, and we know that the Government are in dispute with the Indian Government about the new arrangements. I should be interested to know what the position is now. I appreciate the point

made by the right hon. Gentleman that export certification will be required to ensure that imports after 31st December will come in free of duty but there are many in my constituency and in Lancashire who would be concerned if they thought that there was the likelihood of any evasion which would dislocate even more the Lancashire textile industry. Is it possible that after certification the exports could be held up, so that substantial quantities of duty free textiles came in after 31st December 1971? For example, India, and other countries, too, may not have been able to fulfil the quota for a variety of reasons. Is the right hon. Gentleman satisfied that there is no way of getting round the provisions so that there could be a flood of duty-free textiles into the country?

4.45 p.m.

Mr. R. T. Paget: I understand that this is part of a general arrangement to protect our interests, even though it is at the expense of India's interests. I am all in favour of protecting our interests, but, if we were to go into the Common Market, I should equally be in favour of protecting our interests against those of Germany or Italy. Will the Minister confirm that nothing of this sort could be done?

Mr. Noble: The hon. Members for West Lothian (Mr. Dalyell) and Hey-wood and Royton (Mr. Barnett) have spoken about India. The Clause is designed to help the Indian market, because about 90 per cent. of the imports affected come from India, Pakistan and Hong Kong—I have not got the exact breakdown. Both hon. Gentlemen are correct in saying—and I must not stray out of order—that we are in dispute with the Indians over the waiver in the textile agreement, and there will be opportunities—I suspect fairly soon—for debating that when the appropriate moment comes. The Clause has been designed specifically to help these countries so that they are not in any way burdened by being afflicted both with the quota and with the tariff.
The hon. Member for Heywood and Royton asked whether difficulty might arise in Lancashire because of exports being held up after certification and so causing disruption. This is the exact point which the Clause is designed to


meet. This will not be so, because the key question will be: on what date were they shipped? Therefore, although there might be export certification, unless they were shipped by 31st December of this year there could be no question of their being allowed in as part of the quota and, therefore, free of duty.
In reply to the point made by the hon. and learned Member for Northampton (Mr. Paget) about protecting our interests, the provisions of the Clause have in the past been discussed by the previous Government with our textile interests, and it was felt to be right. The consultations that we have had since have shown that the textile interests still feel that this is an acceptable method of dealing with the point. Nothing in the Clause will affect us in any way when we come into the E.E.C. I think the hon. Gentleman may be satisfied that this is a purely temporary Clause to correct what might be a disruptive effect over the last few months of this year and the first three months of next year, and as such—

Mr. Paget: My point is that most temporary and necessary measures to prevent disruption of our trade will be available to us when we are in the Common Market.

Mr. Noble: I am not certain that I fully understand the hon. and learned Gentleman's point.

Mr. Barnett: Perhaps the right hon. Gentleman might explain to my hon. Friend that if we imported as few cotton textiles as the Common Market countries, my constituency in Lancashire would be highly delighted.

Mr. Noble: I am grateful to the hon. Gentleman for helping me. I was about to say that the Common Market has very strict quota arrangements and, presumably, we should have to deal with that problem when and if we entered it.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): New Clause 2–

Mr. Dalyell: On a point of order, Mr. Deputy Speaker. I do not, of course, complain about Mr. Speaker's selection: I only wish to say that the promoters of new Clause 1 are a little sad that it has not been selected.

Mr. Deputy Speaker: That is not a point of order. Selection is the prerogative of Mr. Speaker, and there cannot be any points of order raised against it. I therefore cannot accept as a point of order what the hon. Gentleman says. However, he is now on the record, and I cannot prevent that. New Clause 2.

New Clause 2

ANNUAL REPORT ON THE OPERATION OF CAPITAL ALLOWANCES

The Board shall publish an annual report on the operation of the system of allowances and charges in respect of machinery and plant set out in sections 30 to 44 of this Act.—[Mr. Dell.]

Brought up, and read the First time.

Mr. Edmund Dell: I beg to move, That the Clause be read a Second time.
Perhaps I may first point out that in the reprinted Finance Bill the relevant Sections mentioned in the Clause are now 37 to 47. I should also make it clear that the annual report for which the Clause asks is, of course, a report additional to that which in any case is published annually by the Commissioners of Inland Revenue.
I want to put before the House a simple proposition which I hope will gain universal acceptance. It is that where in order to achieve certain objectives large sums of public money are spent, or allowed against taxation, there should be regular examination of and report on how far the objectives are being achieved, and on the administration and economy of the scheme.
I say that I hope that such a simple proposition will gain general acceptance because when I had responsibility at the Board of Trade for administering the investment grant system a similar proposition was put to me from the then Opposition, and I accepted it. Not merely did I accept it, but I launched an inquiry, which I announced to the House on 4th February, 1969, into the operation of the


investment grant system. Therefore, this idea having come in the first place from the then Opposition and it having been accepted by the then Government, I hope for universal assent that similar considerations apply to the new scheme of investment incentive now introduced.
After all, where Departments expend large sums of public money they in many cases report annually to the House; the Department of Defence does, and so does the Department of Education and Science. The Treasury must now face the fact that arising out of the change in the system of investment incentives it is once more a large spending Department in the area of aid to industry. These allowances are not intended simply to reduce the taxation paid by companies. They are defined, described and intended to be investment incentives, and it is as investment incentives that they should be judged.
When the Department of Defence or of Education and Science puts up its estimates, no doubt these are thoroughly examined by the Treasury, but here we have the Treasury as a large spending Department, and we should enable the House to give careful consideration to the expenditure estimates of the Treasury and to the effectiveness of the expenditure in achieving the objects it has in mind, as we do in the case of these other Departments.
I quite understand that there is a limit on the practicability of assessing the effectiveness of investment incentives. I will not go into great detail on this topic, because I explained the difficulties in full on 4th February, 1969, in a speech of which I am sure all hon. Members are aware, when I announced the intention of the then Government to launch an inquiry into the effectiveness of investment grants.
In summary, the difficulties arise from the fact that there are many influences on investment, and it is very difficult to single out and assess the influence of investment incentives. Nevertheless, this should be done. I said that we were having that inquiry into investment grants. There were also annual reports and, presumably, during the continuation of the investment grant system, residually, there will continue to be annual reports on the operation of that system.
Those reports contain a great deal of information which, unfortunately, under the new system looks as though it will be lost. Those reports do not meet the specification, which I intend to outline to the House, for the reports for which I now call, but they might well have been improved and developed as a result of the inquiry that was launched by the Board of Trade into investment grants.
In addition to the difficulties inherent in this problem of assessing the effectiveness of investment incentives there is another considerable difficulty, and that is that there has been as a result of the introduction of the new system a loss of information; a reduction in the information that will be available about the operation of investment incentives. Compared with the investment grant system, we will have less information, less current information and little regional information.
This is a subject on which I have been in correspondence with the Financial Secretary, and I am grateful to him for the assistance which he has given. I now understand that the Minister of State, Treasury, is to reply to this debate, but no doubt in view of the new Clause he has carefully studied the letter of 24th May which his hon. Friend the Financial Secretary wrote to me. In that letter the hon. Gentleman stated what we had lost by way of information from the change of system, and as this may be regarded as an impartial account of what we have lost, I will read it:
With the cessation of investment grants we lose, of course, that statistical data derived from the administration of the system, some of the most important of which were the industrial and regional analyses of capital expenditure on plant and immobile machinery.
That is what we have lost: what do we have instead? The Financial Secretary tells me that instead we have the existing information about capital formation, which is of little regional assistance, and we will have the new annual censuses of production, but as the first has been taken this year in respect of 1970 this information will be somewhat in arrears, and we have yet to see it. Turning to capital allowances, where information about capital allowances is up to date it is too highly aggregated, and where it is not too highly aggregated it is hopelessly out of date.
Much of the latest information now available relates to 1968. The Financial


Secretary recommended to me certain tables in the 1971 Inland Revenue statistics, the latest year for which is 1967 when the investment grant system was just coming into operation. On this basis we will have to wait a considerable time before we have information about the capital allowances system which is in any way relevant to an assessment of its efficiency. There is no regional information about capital allowances.
Therefore, it has to be accepted—as, I believe, the Financial Secretary did accept—that the information, at any rate in regional terms, is grossly deficient. What the hon. Gentleman said was that the figures in respect of capital formation and capital allowances
… provide most of what could reasonably be required, apart from a regional analysis.
I must tell the Financial Secretary that I do not think that they do contain most of what could reasonably be required, and the qualifying clause, "apart from a regional analysis", is of some importance.
Regional policy is one of the main objects of having investment incentives at all. If one does not have information on effectiveness in that area what is the use of the information that is available? We therefore need to improve the quality of the information which will be available about the operation of the scheme, and particularly do we need to improve it as regards regional information. Regional objectives are the main objectives of investment incentives, and we must see that they are being fulfilled. So we need a report. The report should state the available information. It should comment on the policy and administrative aspects of the operation of the capital allowances scheme. I suggest that the report should be regularly considered and reported upon to the House of Commons as to policy possibly by the Trade and Industry Sub-Committee of the Expenditure Committee and as to administration by the Public Accounts Committee.
5.0 p.m.
I will now outline some of the matters which I think should be dealt with in such a report. First, administration. There is a danger of thinking that tight administration of allowances is less important than tight administration of grants. I emphasise that these allowances

are as much public expenditure as the grants ever were and should be treated accordingly.
There are certain possible sources of over-allowance against taxation within the scheme. The most obvious is the movement of plant and machinery out of development areas or, in development areas, between manufacturing industries, on the one hand, and service and distribution industries, on the other.
Under the investment grant scheme there was a system of inspection to check on what was being done. This point was raised in Committee by my hon. and learned Friend the Member for Lincoln (Mr. Taverne). In response to the reply from the Chief Secretary he said that he was not convinced. He had good reason not to be convinced. The Chief Secretary said:
In the tax case, the issue would be of less overall significance—merely a bringing forward to an earlier year of the tax allowances on 40 per cent. or less depending on when the transfer took place.
That is an interesting comment. It is about these important differentials which are alleged to inspire industrialists to invest in development areas. When dealing with administration apparently these differences are of little importance; nobody is likely to try to benefit from them. So, when the Government think that they have to persuade us that they have a significant regional policy, these differentials are important; but when dealing with the administrative aspect they say that they are not significant.
The Chief Secretary, in an attempt to console the Opposition about his refusal to accept my hon. and learned Friend's comment about the need for tight administration, said:
Not least among the factors enabling the Revenue offices to detect such matters is their general familiarity with taxpayers' business activities. Their continuing contact enables them to identify those cases where there could be a special risk of diverting assets to premises outside a development area, and to make appropriate inquiries."—[OFFICIAL REPORT, 14th June, 1971, Standing Committee H; c. 607.]
The one kind of information which the Inland Revenue certainly does not get in all cases is the regional distribution of a company's investment. The Financial Secretary, in his letter of 24th May, told me specifically that that was the reason that regional information could not be


provided. So, on the one hand, we are told that regional information cannot be provided because it is not necessarily included in the return, and on the other, that tax inspectors can check merely looking at a piece of paper representing the tax return of a company. I do not believe it. I think and fear that there is grave danger of slackness in administration in this sphere. The Public Accounts Committee will have to watch this as keenly as it watched similar aspects and problems with the investment grant system.
In Committee the Opposition also raised the problem about ships and claims for free depreciation on ships operating in a way which might be a cost on the balance of payments. I do not propose to go into this in any detail, because the Chief Secretary in Committee, at c. 600, admitted that it was a severe problem, and made it clear that it was being watched. I know that it is a different problem from that which existed with the investment grant. I accept that, when in Government, we did not make free depreciation for ships conditional on a balance of payments test. In logic I think that we should have done. Nevertheless, I am not satisfied with the present position. I hope that the Government will watch it carefully. Meanwhile, I simply ask one question: will the Treasury or the Inland Revenue make a balance of payments test where there is a claim for free depreciation on a ship built outside the United Kingdom? If not, why not?
The next set of problems I want to indicate as the subject matter for discussion in the report proposed in the new Clause involve certain policy matters relating to the effectiveness of the new capital allowance system. First, what is the real value, as an investment incentive, of a 60 per cent. tax allowance, particularly for distribution and services? The Government have introduced this 60 per cent. tax allowance for distribution and services. We discriminated against them. The initial effect of the introduction of this great benefit on distribution and services has been a fall in investment intention in that area. On 16th June the Department of Trade and Industry forecast a fall of 5 per cent. in investment intention in 1971 compared with 1970, but that 1972 would be the same as 1971. So the first effect of introducing an incentive,

which was not there before, is a fall in investment intention.
What is the Government's view? This is the kind of matter on which I should like them to comment. Do they suggest that the fall would have been greater but for the introduction of this investment incentive? Incidentally, the Financial Times today, in its assessment of investment prospects, does not seem any more hopeful than the Department's assessment of 16th June. This again shows that perhaps the new system is not working as effectively as the Government hoped.
The second area which might be discussed in the report proposed in the new Clause is the effect of the new system on important industries of low profitability, such as shipbuilding, for example. Will they become profitable, or will they become even less competitive through failure to invest? Similar considerations might apply to certain sections of the motor car industry, which is one of our most important exporting industries.
What will happen under this system to important industries where there is a long period of gestation before profit arises? I instance large chemical works or deep mining. We had a discussion in the House a short time ago on mining problems concerning one particular company. I believe that the C.B.I., in making its representations against the investment grant system, at any rate seemed to believe that this was one area in which there should be a grant system. However, the Government have made no provision to meet the C.B.I, on that point. I recall the hon. Member for Bedford (Mr. Skeet) saying that he was against the investment grant system in nine cases out of 10, but that in this tenth case grants were needed. However, grants are not provided.
Let us have some information from the Government and regular reports about the effect of the introduction of the capital allowance system on important import-saving activities of this kind.
Above all, we want an assessment of the effect of the new system on development areas. We believe that the change has so far had a marked adverse effect on development areas. The kind of information which might be provided and discussed in the report which I am describing is what the actual differential has turned out to be. The Government have


said that the differential is unchanged following the introduction of the new system as compared with what it was on 26th October, 1970. I have said in the House many times that I believe that statement to be misleading, and indeed meaningless, but the Government obviously believe that it means something and, therefore, will be able to justify it in due course, I hope.
Let the Government in due course provide the information which shows that the differential has been maintained. I fear that the Minister of State will say, "The Financial Secretary told you in his letter that we cannot do it". So they make claims to the effect that the differential is being maintained, sustained by the knowledge that there will be no test of the accuracy of their claims at any time in the future.
It is not good enough. If the Government make claims of this sort, they must be able to justify them. What, again, is the actual flow of aid to development areas? What will it turn out to be? In Committee on the Floor of the House I quoted the remarks of the Prime Minister in 1965 to the effect that it was not simply the differential that was important but the actual flow of aid to the development areas. I am glad that the Minister of State is here so that I can remind him of those wise words of the Prime Minister in 1965, because the Minister of State has been telling the House for some time that the only thing that matters is the differential. This is a point on which he is in severe disagreement with what the Prime Minister said in 1965. I believe that the Prime Minister was right in what he said in 1965 and that on this point the Minister of State has been talking nonsense.
However, what will be the actual flow of aid to the development areas? Again, I fear that the Minister of State will refer to the Financial Secretary's letter and say, "We cannot tell you". It is important that we should know. What do the Government intend to do about it, and how will they report to the House?
What will be the effect on inward investment of the reduction in the level of assistance? This is another subject which could be the subject of information and comment in a report such as I am suggesting.
There is a competitive element as between countries and an increasing proportion of American investment has been going to E.E.C. countries. If we joined the E.E.C. this might continue to be the case unless there were adequate incentives to investment from abroad in Britain. Therefore, it is important that there should be a regular assessment of what is happening.
Another area which should be commented on is the effect on investment in development areas of the failure to provide for the possibility of transitional arrangements if, for example, development areas are downgraded. As a result of a failure to provide for transitional arrangements there will be great, and I believe damaging, uncertainty regarding the reliability and duration of the new scheme. People who are proposing to invest will be uncertain to what extent and for how long they can rely on it, and their doubts on that score will be reinforced by the Government's failure to make any provision for transitional arrangements in respect of projects in process on 26th October and their decision to limit their transitional arrangements to contracts that had actually been signed.
I have some experience of these matters, because again and again during my period at the Board of Trade potential investors came to see me and asked what guarantees could be given about the duration of the investment grant system. I could give no guarantees. I could only point out the fact that the then Opposition did not like the investment grant system. However, I said, and I think that I was entitled to say, that in the past there had been provision for transitional arrangements.
Indeed, had I been talking to those potential investors in the period of the General Election I would have been able to point to the fact that the Conservative Party was suggesting that there would be transitional arrangements. In fact, there are no transitional arrangements. This will have an adverse effect on people's confidence in the existing scheme in development areas.
In short, a report of this type would provide the opportunity for an annual review of development area policy. This year, to take an example, it would help


Parliament, the public, and particularly the Government, to understand why, after the large reductions in taxation upon which the Chancellor of the Exchequer prides himself and the introduction of free depreciation in development areas, there is nevertheless higher unemployment and a severely reduced number of inquiries by industrialists regarding investment in assisted areas.
There is need for a report, because there is here a large body of public expenditure. It is necessary to test its efficacy. The United Kingdom has a special problem of slow growth. Our main hope of faster growth is to stimulate investment. Lacking faster growth we need special and effective aids to investment. There is a need to stimulate, and indeed to distort, the market forces to achieve a higher rate of investment. Therefore, there is a need to assess regularly the effectiveness of the aids that are provided. The evidence so far is against the new system. At any rate let us have a regular opportunity to assess it which might lead the Government to a realisation of the need to change it.

5.15 p.m.

Mr. Douglas: My right hon. Friend the Member for Birkenhead (Mr. Dell) made an excellent speech in proposing the Clause. The additional points I shall raise relate to information which we might seek to have embodied in this type of annual report relating to company balance sheets.
I vividly recall reading the extract of a speech by the Secretary of State for Trade and Industry in Dusseldorf when he made some very poignant remarks about the adequacy of accountancy in contemporary circumstances of high inflation and where companies' asset structure and their balance sheet valuations did not reflect the cost of replacement either at current valuations or at possible future valuations.
If we are to be troubled about the adequacy of the accountancy profession—this is particularly important in a regional context—and if companies are to be squeezed from the point of view of liquidity and are to hold up investment, we must carefully examine whether tax-based incentives are suitable to enhance investment opportunities in a period of

high inflationary pressure. It would be appropriate in the context of a report to ensure that in any consideration of investment opportunities questions such as the degree of inflation prevailing and the adequacy of investment incentives offered by the Government were taken into consideration.
I agree wholeheartedly with my right hon. Friend that the Treasury has an equal—perhaps a greater—responsibility to examine the method of approach by companies in their use of the investment incentives now proposed by the Government. In the past the Department of Trade and Industry, or the Ministry of Technology as it then was, built up a considerable body of expertise to examine whether the assets for which capital allowances were given were deployed for the purposes and in the areas for which the allowances had been claimed. The Treasury should have transferred to it this body of expertise, either in terms of Civil Service personnel or the files and details of the companies which in the past have used capital allowances, including details of the regional impact of such allowances.
My right hon. Friend has made a number of valid comments about the regional aspects of capital allowances.

The Minister of State, Treasury (Mr. Terence Higgins): The hon. Gentleman keeps referring to "allowances". Does he mean grants or allowances?

Mr. Douglas: I mean grants—the grants which the Labour Government deployed.
We have gathered a great deal of information as to the regional impacts of these grants. The Select Committee on Scottish Affairs paid particular attention to the use to which these allowances were put in Scotland. Unfortunately, because of lack of detailed information then, no distinct conclusion could be reached visà-vis tax allowances in this situation. However, this information is decidedly appropriate in determining the effectiveness of regional policy. If we are to enter the European Economic Community, the effectiveness of our types of regional incentives must be weighed against others.
To digress here, it is noteworthy that the Northern Ireland Government, in their proposals, will have some opportunity to give incentives in the form of grants. I assume that they will have some


measurement of the effectiveness of grants in Northern Ireland to ascertain their usefulness in creating employment opportunities there. Unless we have that type of measurement, we shall not have an opportunity to assess the effectiveness of our system of investment incentives in enhancing employment opportunities within our regions.
If we were to argue about the effectiveness of the phasing out and ending of the regional employment premium in 1974, we should have to see how effective is the harmonisation of tax-based incentives in marrying up with the creation of the right type of employment opportunities in the regions. Right hon. and hon. Gentlemen opposite have always argued that grants created a capital-intensive structure in the regions. That may or may not be true. One of the criticisms which we might have made about grants was that we did not get the necessary spin-offs from them that we might otherwise have expected in terms of enhancing employment overall. If we remove the grants, as we are about to do, and introduce tax-based incentives, we shall be unable, in regional economic terms, to look at how these new incentives will relate to the build-up of either foreign-based industries or indigenous companies within the regions.
In regional impact, it is essential to have some assessment of the effectiveness of the new policies. The Government may claim, "It is early days yet. We are only now getting the opportunity of increasing company liquidity and, therefore, we cannot see at present how tax-based incentives will operate." That may be an excuse which the Government could proffer, or it may be offered as a reason.
I cannot find any company of any magnitude in Scotland that has confidence in the future in terms of the new investment incentives. I can find no company willing to say, "We are convinced that the new tax-based incentives are desirable in the regional context." I hope that the type of report for which my right hon. Friend has asked will be produced by the Government—not because we ask for it in narrow, partisan terms but because we want to see in concrete terms the effectiveness of regional policy on different dimensions and attitudes.

Mr. John Horam: As my right hon. Friend the Member for Birkenhead (Mr. Dell) so rightly said,

investment allowances are a major element in any regional policy. We know the problems of regional policies; at least, we see the conditions which are produced by regional imbalance in this country. We who come from and represent development areas see these problems every time we visit our constituencies, and they colour our whole approach to politics and to issues of this kind.
Equally, we know, in theoretical terms, the kind of solutions that we would want. We want solutions which would deploy public money effectively and which would be, in the fashionable phrase, cost-effective. But we also want solutions which are effective and which are seen to do what they are mant to do, which is to reduce the regional imbalance.
Part of the link between the problems and the solutions is provided by information. We must have good information if we are to plan properly and sort out the most effective solutions. I accept that there can be debate on even a non-political basis about the kinds of solution that there may be to our regional problems. Yet it is generally agreed by probably all hon. Members that the regional statistics and information that we have at present are extremely inadequate. This was first revealed when we had the strategic document produced by the Planning Council set up by the previous Labour Government. One of the big criticisms of that Council, excellent though its analysis was, varying from region to region, was the self-evident paucity of statistics and information on which it relied. It relied mainly on employment statistics, which were produced widely and well, for obvious reasons. But there was little else of a critical kind to rely on to diagnose the fundamental problems, which the Council attempted to do.
Equally, the Annual Abstract of Regional Statistics contains a great deal, but very little of it is related to some of the crucial equations which we have to look at, some of the fundamental factors we need to know far more about in the economic, social and industrial health of a region. Far too few of the statistics are related to the important things. If one looks at that Abstract, one sees that in the whole area of statistics on regional matters, only one page is about investment by private industry. That is a page summarising the effect of investment grants. That page will no longer be


present in future years. Presumably we shall have no information directly related to the regional consequences and effects of investment grants, allowances, or whatever system is used.
Equally, comparing that with the sort of information available in other countries, under the French planning system the regional equation is built in at the beginning of the public expenditure and taxation operation. They know not only on what programmes the public expenditure is being made, but also exactly where the money is spent. They break it down regionally, that is to say, vertically as well as horizontally, so that they know not only what is being spent on schools throughout the country, but they can see even in a very small area what is being spent on schools, roads, grants to industry and so on. That is the kind of view which we need to have of our policies before we can make them effective. We need that kind of insight into the situation.
5.30 p.m.
Yet, given this paucity of information—as compared with the excellent information achieved by various methods in other countries—this Government will reduce the amount of information coming forward. Furthermore, they do not intend to try to make it better than what it is. They do not care very much about the situation. I want to quote the reply given to my right hon. Friend the Member for Birkenhead at an earlier stage, when he referred to the question of information resulting from the new system.
The Chief Secretary said:
The right hon. Gentleman asked about the provision of information and statistics under the new system. The Revenue is not able to publish statistics about tax allowances given in the development areas because many firms operate in both development areas and elsewhere. In preparing their accounts for tax purposes they are not required to separate out the allowances which arise in different localities.
I suppose that we could consider forcing people to provide this information, but I am against adding to the administrative burdens on industry. However, statistics relating to tax allowances generally are published in the National Income Blue Book and Inland Revenue statistics."—[OFFICIAL REPORT, 18th May, 1971; Vol. 817, c. 1221.]
There are certain inconsistences underlying the lordly idea that we must not

trouble industry, and that it is too much bother for industry to produce the information required. First, industry is getting a certain amount of money in respect of these allowances from the State and, ultimately, from the taxpayer. To that extent Parliament has a right to know where this money is going and how it may be spent, and it should be given the maximum information.
Not only has Parliament the right to know; industry itself does a great deal of digging for information of just this kind for its own planning purposes. I happen to know something about this matter. Before I became a Member of Parliament I was an economic consultant, and I can tell hon. Members that a whole business is devoted to the task of research for the benefit of industry—searching for the information that industry needs, sometimes at inconvenience to ordinary members of the public.
It is a curious argument that industry which is receiving money from the State should not be troubled by being asked to give further information because it will complicate the tax forms that have to be filled in. That same information is needed by industry for good planning. Industry is finding out as much as it can about the general problems in order to get its own planning right.

Mr. Higgins: Can the hon. Member show us how the information that he has indicated would be of relevance to a firm's capital budgeting proposals?

Mr. Horam: I do not quite follow the Minister's point. I thought that my right hon. Friend the Member for Birkenhead explained how further information on capital allowances would help our understanding of its effectiveness.

Mr. Higgins: I understood the hon. Member to be relating it to the capital budgeting decision of individual firms.

Mr. Horam: No—not at all. I was making the point that it is a little absurd to argue that we should not trouble industry for further information about its activities, or about money that the State gives it, when industry itself takes a lot of trouble to discover first such information from its customers and clients, and from ordinary members of the public.
At one stage I worked for Rowntrees for six months, in London. I questioned


surburban housewives, trying to discover whether they wanted the covering of Kit-Kat bars to be thick or thin, and made of milk or plain chocolate; what they wanted the wrapper to look like, and whether they were satisfied with the price. The price, incidentally, is now very much higher than it was then.
That is the sort of information that industry desperately requires and goes to a great deal of trouble and inconvenience to acquire. The Government, similarly, go through a great deal of trouble to acquire information for planning purposes. It is said that industry should not be bothered; that it has already too many forms to fill in. But this information is essential for planning purposes. We must have it if we are properly to plan the facilities and services that the State provides.
I want to know what the Chief Secretary meant when he said that firms need not send in the information about the distinction between development areas and non-development areas. I should have thought that the whole point was that there are differential allowances for development areas and non-development areas. I find it difficult to believe that such information should not be sent in some way to tax inspectors, since there is a differential grant and a differential allowance. I accept the Minister's greater wisdom—I know that he reads his briefs well—but I am surprised that that should be the case. I should have thought that a firm would send in this information. It would certainly need it itself, and it would not be involved in much trouble if it had to pass it to the taxation authorities.
We are concerned not only with the Government's reluctance to ask for the provision of information of this sort, on grounds that we must beneficently call laziness; we are also a little suspicious about the attitude underlying it. Since the Government are committed to reducing public expenditure—or, at least, reducing the rate of increase in public expenditure—and made pronouncements about regional policy even before the General Election which indicated that they believed in some form of regional policy, we find it difficult to know how they square the circle. We suspect that they do so by occasionally announcing little lump sums for ad hoc programmes

which, when analysed in the way that my right hon. Friend the Member for Birkenhead has analysed them, add up to a programme far less satisfying and less effective than the one operated by the last Government, or that we should be entitled to hope for at this point in our history.
The proposals under the Local Employment Act were shown eventually to indicate a rate of increase lower than the rate of increase achieved by the last Government. Secondly, there was help to the special development areas, which, once the Prime Minister got his facts right—he over-estimated the position in the first place by 150 per cent., and even then it will be only £10 million in five years' time—are shown to amount to nothing very quickly. More recently there was a statement from the Secretary of State for the Environment on policy in the housing areas. That seemed to show a quaint mixture between regional policy and housing policy. We are all aware that housing is as bad in London as in any development area. Hon. Members who represent development areas would concede that. This is a strange mix-up in inter-departmental co-ordination. If that is what the Secretary of State's policy will lead to, he had better start on a different tack.
Finally, there was the inspired leak—perhaps the word "inspired" is a little odd in this context—of a £100 million public works programme for the winter. The word "inspired" is a little too ambitious for something that the Labour Government have already done four times, in the winter, and which is no more than a topping up of a well-known programme. Not only that; it was used by the Labour Government for anti-seasonal purposes to counteract the seasonal drop in the work of the construction industry.
This Government seem to be using it to cope with the whole problem of unemployment, and in that respect it is more unsatisfactory now than it was in the first place. This policy of announcing with great fanfares that lumps of money are going to be available in five years' time, to be put into regional economies, seems to require more careful inspection—the sort that would arise if we had an annual review linked to the capital allowances programme, as an essential part of regional planning. In


order to bring about more effective programmes, with good planning, we must have more information coming forward on regional matters which will allow people to make more effective judgments of the effect of our programmes. That would clear away the vast cloud of suspicion that hangs over the Government's efforts so far.

Mr. Dalyell: It struck me, when some of my hon. Friends were speaking, that there was an uncharacteristically petulant reaction from the Minister of State at the Treasury when he intervened merely to ask why we wanted all these statistics anyway. I may have misinterpreted him, but that was the impression created in my mind.
The first reason, of course, was given admirably by my right hon. Friend the Member for Birkenhead (Mr. Dell). How can we operate a regional policy without this kind of information? But there is, in my view, a second reason, namely, that there are a great many people who want to know where substantial sums of taxpayers' money have gone. Here is an example. With the recent closure of Plessey in Alexandria, there are a great many of our fellow-countrymen, as my hon. Friend the Member for East Stirlingshire (Mr. Douglas) knows, who simply want to know how it can happen that so much money goes into creating jobs and then—lo and behold—one Friday afternoon we are told that the whole operation is coming to an end. In a democracy, this sort of legitimate curiosity should be satisfied, and this is a good reason, apart from all the other points raised by my right hon. Friend, for having a report of the kind proposed.
I realise that time is short, and I shall briefly state three separate issues. First, there is the question of the low-profit industry. It must be remembered that in development areas it is precisely the low-profit industries which provide many of the male jobs, if not of the female jobs. On this count alone, therefore, they are entitled to some help. But the low-profit industries now, unfortunately, include some of the key growth industries. I think, in particular, of electronics and machine tools. When one is told by Mr. De Barr of the Machine Tool Research

Association that orders are now running at under 40 per cent. of what they were 18 months ago, one sees the seriousness of the situation.
How are the Government's new benefits, so called, helping the current low-profit industries such as machine tools or—dare I say—the electronics industry, which is in considerable crisis at the moment, not just in the West of Scotland, as evidenced by the Plessey problem, but far more generally? How does the Minister of State think that the new system will help the likes of the electronics industry in Scotland? Why should we not have a fairly full analysis in the kind of report which we have proposed of what the Government are doing in respect of these job-creating industries?
The second issue is that of the long-gestation industry. I have shipbuilding particularly in mind here. The sub-contractors of the Upper Clyde, or, for that matter, in this case, of the Lower Clyde, are anxious people now. They are dependent on the shipbuilding industry far more than even the sub-contractors of Rolls-Royce are dependent on Rolls-Royce.

Mr. Douglas: I hope that it was just a slip of the tongue. With respect, I should not have thought that the situation of Lower Clyde sub-contractors was in any way on a par with the situation on the Upper Clyde.

Mr. Dalyell: I accept that at once. The point I am attempting to make is that shipbuilding sub-contractors as a whole are more dependent on shipbuilding than even the Rolls-Royce sub-contractors are on Rolls-Royce.
Here again, among all the other causes of recent trouble, the effect of the Government's own measures should be looked at candidly. This is all the more reason for a serious and candid report such as is called for in the new Clause.
The third issue relates to the multinational company. Whereas, by the time the scheme had reached some maturity—it was not altogether satisfactory at the beginning—it was comparatively easy to identify the effects of grants under the old system in relation to multi-national companies, I suspect that it is now, under a system of tax allowances, fairly easy for


the multi-national companies semi-legitimately to manoeuvre their profits and returns between factories in development areas and factories in non-development areas so that great confusion can be created.
It is all the more important, therefore, as we become more dependent on multinational companies, to try to identify precisely what the effects are of granting taxpayers' money under the new system. I make no bones about my view that the system lends itself to abuse by certain multi-national companies, were they so minded, the like of which we did not have under the Labour Government's system.
I realise that time is short, so, having made my three points, I leave the matter there.

5.45 p.m.

Mr. Higgins: The right hon. Gentleman the Member for Birkenhead (Mr. Dell) moved the new Clause in characteristically constructive frame of mind, and I shall do my best to reply to the various points which he and his hon. Friends have raised. As the right hon. Gentleman said, the number of Clauses has changed since the Committee stage, so that the reference now, I think, should be to Clauses 37 to 51.
The right hon. Gentleman began by stressing that what he had in mind was an additional report, that is, as I understand it, a report in addition to that which is at present published by the Board of Inland Revenue, but it became clear during the debate that many of the analyses for which he is asking, and for which his hon. Friends the Members for East Stirlingshire (Mr. Douglas) and for Gateshead, West (Mr. Horam) are asking, are not of a kind which could reasonably be carried out by the Board of Inland Revenue, since they are, in effect, broad economic analyses either of the effect of grants as against allowances on individual firms or of the effect of allowances on the economy as a whole.
Therefore, the terms of the new Clause do not seem to meet the argument which the right hon. Gentleman began to advance once he left his introductory remarks. The right hon. Gentleman compared the report required in the new Clause with the Department of Trade and Industry's reports on investment

grants. But these reports were self-contained in a separate part of the administration of the responsible Department. The report which the right hon. Gentleman is asking the Inland Revenue to produce on an annual basis is a report on the system of allowances and charges on plant and machinery only in so far as it has been altered in this Finance Bill.
I do not suggest that one should necessarily read the Clause literally, but it would, as it stands, require a report on capital allowances for expenditure incurred on plant and machinery before 5th November, 1962, and after 26th October, 1970, but not for expenditure incurred between. Also, it would cover the new free depreciation allowances in respect of plant and machinery in development areas, but not in respect of mining works.
Therefore, although I do not make much of the point, I take it that the right hon. Gentleman does not intend us to read his new Clause literally in that sense. However, even if we do not read it literally, the point remains that the new allowances in the Bill are only one part of the system of capital allowances covering the use in trading of a wide variety of depreciable assets, such as industrial and agricultural buildings, patents, know-how and the rest, and this system in turn is only one part of the system of rules for computing taxable profits. So the kind of report which the Clause seeks to introduce seems rather inconsistent with the idea that it is to be a broad survey of the entire regional development scene.
The Inland Revenue already publishes an Annual Report which is presented to Parliament as a Command Paper and is supplemented by a volume of statistics. Of course the Board will put in the Report anything of special interest with regard to capital allowances which it considers relevant in that context. But it does not seem that the kind of instrument which the right hon. Gentleman proposes is one which would carry out the objectives he and his hon. Friends seem to have in mind.
The right hon. Gentleman also made a number of points about the provision of information on capital allowances and so on. He said that he had been in correspondence with my hon. Friend the Financial Secretary on the subject. The House will not wish me to repeat in detail the


elaborate summary of all the data that happens to be available, but one point in particular should be taken up on the new census of production which will be produced annually, beginning this year with a survey covering 1970. This will be a source of information which I think will prove on a regional basis to be of relevance to the kind of problems the right hon. Gentleman mentioned.

Mr. Douglas: May we have an assurance that the Report is comprehensive? My recollection is that it is a sample survey and will not necessarily give the information asked for.

Mr. Higgins: It will give figures on a regional basis. I shall come to the relevance of figures from such surveys. The hon. Gentleman said that the figures are too aggregated or too out of date. That is a good debating point, but in making decisions on most such matters the question of how out of date they are is not the most crucial thing, provided they are not very out of date. We want figures on which we can appraise the policy concerned. In that context, it is important to distinguish between the effects of measures on the individual firm and their effects on general economic policy. That was why I intervened in the speech of the hon. Member for Gateshead, West. I certainly was not seeking, as the hon. Member for West Lothian (Mr. Dalyell) suggested, to intervene unfairly but was seeking to distinguish which of those two objectives he was talking about. The right hon. Gentleman and the hon. Member for Gateshead, West with with their experience in industry—and I have had some slight experience in industry on capital proposals—will agree that to try to appraise the impact of incentives on the individual firm on the basis of the kind of figures which the right hon. Gentleman talked about would be very difficult. As he himself rightly pointed out in a speech back in 1969, many different variables may affect the investment intentions of individual firms.
I found it extraordinary that the hon. Member for West Lothian should suggest that the scope for abuse is rather greater under the system of allowances than under the system of grants. Opposition spokesmen on the subject—particu

larly the hon. and learned Member for Lincoln (Mr. Taverne) in Committee, as reported in column 608 of the OFFICIAL REPORT of the Committee proceedings—have not fully appreciated that it is a great deal more difficult for abuses to occur under a system of allowances than it was under a system of grants.
The right hon. Member for Birkenhead, referring to the remarks of my hon. Friend the Chief Secretary in Committee, asked whether inspectors really could look at the proposals and decide whether abuses were taking place. As I and my hon. Friend have tried to show, the inspectors of taxes look very closely at the position of the individual firm. If, for example, the inspector knows that about 40 per cent. of a firm's trade is being done in a development area, and 100 per cent. allowances are being claimed, he might well look at the matter rather seriously. The inspectors are naturally more in touch with the individual firms.
The situation with regard to investment grants was very different. The Board of Trade Report on investment grants for 1968–69 said:
Since this system of physical inspections of plant and machinery started in the autumn of 1967, 21,000 establishments have been visited and this has resulted in prosecutions of two cases of irregularity.
That might suggest to the hon. Member for Gateshead, West, who stressed the importance of not putting too heavy a burden upon individual firms, that we can perhaps carry the proposals for tight administration to too great lengths. Our view is that the system of allowances which we have introduced is likely to be very carefully scrutinised by the individual tax inspectors who are responsible. We believe that we have a soundly-conceived system of incentives, and that the system of administering it through the 700 local tax offices will enable us to overcome the kind of difficulty which the hon. Gentleman raised.
A number of remarks were made about the effectiveness of the change of system. This has been a major issue of political dispute between the two parties over the years. It is not our view that an annual report of the kind suggested by the right hon. Gentleman this evening would be either comprehensive, for the reasons I have given, or effective in enabling us to


appraise the basis of the allowances. While we shall certainly take into account what has been said, and the Inland Revenue will carefully consider what further information can be produced, we do not believe that the House should accept a proposal for an annual review of the kind suggested in the Clause. I therefore hope that the House will reject it.

Mr. Dalyell: The issue was raised of the low-profit company which gives jobs in development areas, particularly male jobs. Can the hon. Gentleman say something about an analysis of the effect of the system on that form of company?

Mr. Higgins: A number of points were raised, and I naturally listened to them with interest. Many of them are matters of controversy between the two parties. I cannot see how an annual report of the kind sought would necessarily give the data which would meet the problem the hon. Gentleman has raised. Clearly, we could not break down the allowances received by individual firms so that they could be identified.

6.0 p.m.

Mr. Dick Taverne: This is a serious Amendment which was carefully argued by my right hon. and hon. Friends. The Minister of State has not come within a mile of answering the case for more information. He said that the kind of information asked for could not be supplied by the Inland Revenue because it would require broader economic inquiries which the Inland Revenue would not be in the best position to undertake. There would be no objection from us if inquiries of this kind were carried out by the Treasury, which would be in the right position to do so. But since this is related to capital allowances, presumably it is a subject which the Board of Inland Revenue could publish. The hon. Gentleman said that the Board's Annual Report will mention any special features, but the burden of our case is that the kind of information now supplied is not sufficient to deal with this major question.
It is true that the new census of production will help in some respects, but it will not show the capital allowances side and the influence which capital allowances have on the development of production and the relationship between

this and regional development. The system proposed in new Clause 2 would cover most of the questions which have been raised. It would also cover questions of the mining industry and others concerned with first-year allowances. The hon. Gentleman said that although some of the information which is supplied is out of date, that does not necessarily matter. What we will want and need to know is how the position has changed and how it is changing. We need this to be able to form a judgment on how it is working.
This concerns expenditure involving hundreds of millions of pounds and, as has been pointed out, to talk as if any extra expenditure on doing elaborate surveys was a minor matter on which one should not waste civil servants' or company time, is totally to underrate the kind of issue at stake, because we are faced with enormously important questions affecting the expenditure of hundreds of millions of pounds.
The fact that this is a form of tax allowance is neither here nor there. We have persistently argued in Committee and elsewhere that there is no difference in principle between positive expenditure and negative expenditure—the area which is regarded for some matters by Government spokesmen as primarily the jurisdiction of the Chancellor and not as Government policy as a whole. There is no basic difference between one form of Government investment incentive and another in desirability and effect. For example, there is no basic difference in principle between housing subsidies and tax reliefs on mortgages. So the fact that it is a form of tax allowance should not lessen the degree of information provided or the degree of scrutiny which the House exercises.
We need to know the information which the Government have brushed aside in the past. It is clear that any change from the system of grants to the system of allowances which the Government undertake needs major research, and that the Government did not make inquiries into the effects there would be and the way they would be achieved. It is clear, from an answer by the Secretary of State for Trade and Industry, that the kind of information which should be obtained would be of enormous value. This was the detailed Written Answer


given by the Secretary of State to my right hon. Friend the Member for Birkenhead (Mr. Dell) on 14th December. The Secretary of State was asked
… if he will now publish the results of the survey of the effectiveness of investment incentives.
Some details were given about the pilot survey which showed that
… it is difficult to establish how far companies' decisions may have been influenced by investment incentives …
rather than other factors. The right hon. Gentleman said:
Despite the size of sample and response rate, the survey produced much information of value on the factors entering into a company's investment decisions, and on the methods of investment appraisal used.
Yet this is precisely the kind of area which we need to be covered in the Annual Report. The right hon. Gentleman stated, for example,
About 30 per cent. of the investment may not be appraised at all, perhaps a third of this because some firms do not use any formal methods of appraisal, and the remainder because many firms do not appraise small projects or replacements. Much of the remaining 70 per cent. of investment is appraised by more than one method of calculating returns on investment.
Is this picture changing? Are more careful D.C.E. calculations being done? This is a matter of great importance in judging the effectiveness of these allowances. The right hon. Gentleman said:
A large part, perhaps three-quarters, of investment may be done by companies in which managerial factors constrain investment to some extent. Such factors include a lack of satisfactory proposals or of adequate staff to manage projects …
How are decisions arrived at? How far are the consequences of those decisions, which have a considerable impact on the negative expenditure of the Government, determined by rational considerations in the first place?
Again, the right hon. Gentleman said:
So far as the evidence of the pilot survey goes, firms doing more than half of all investment may have increased their investment in the development areas as a result of the regional differential; the size of the increase cannot be

estimated, but generally appears to have been small."—[OFFICIAL REPORT, 14th December, 1970; Vol. 808, c. 238–40.]

So there is some evidence that the regional differentials are of importance but it is not yet known exactly how far they are of importance. But all this is absolutely vital because, if the Government get this kind of decision wrong, if the relationship between the two is wrong, disastrous consequences may follow.

Again, one would wish to know how far there was an effect which was caused by the delayed impact of tax allowances as compared with investment grants, because the allowance would not be received until tax became payable, which is a delay of nine months after the end of the accountable period. There may be, therefore, up to 21 months' delay between expenditure and the effect on the company's finances compared with the delay of about six months in the case of grants. How far does this extra delay affect the change? How far is this the effect of the change? I am advised that, from a prudent accounting standpoint where the true rate of wear and tear is less than the tax rate, as would clearly be the case under the new system an adjustment will be necessary in the tax equalisation reserve account in order that part of the profit should be allocated to cover tax on the latent balancing charge which arises on the accelerated rate of write-down for tax purposes. If that happens, profits cannot be available for company development.

There are a host of such questions which are vital in deciding whether the system is effective and how it is working out in practice. This is an important Amendment. I do not think that the information given is sufficient to judge the effective expenditure of hundreds of millions of pounds of Government money and, in the circumstances, I advise my right hon. and hon. Friends to vote for the Second Reading of new Clause 2.

Question put, That the Clause be read a second time:—

The House divided: Ayes 169, Noes 190.

Division No. 406.]
AYES
[6.10 p.m.


Abse, Leo
Ashton, Joe
Blenkinsop, Arthur


Allaun, Frank (Salford, E.)
Barnes, Michael
Boardman, H. (Leigh)


Allen, Scholefield
Barnett, Joel
Booth, Albert


Archer, Peter (Rowley Regis)
Bishop, E. S.
Bradley, Tom




Brown, Ronald (Shoreditch & F'bury)
Howell, Denis (Small Heath)
Pendry, Tom


Buchan, Norman
Hughes, Mark (Durham)
Pentland, Norman


Callaghan, Rt. Hn. James
Hughes, Robert (Aberdeen, N.)
Perry, Ernest G.


Campbell, I. (Dunbartonshire, W.)
Jay, Rt. Hn. Douglas
Price, J. T. (Westhoughton)


Carmichael, Neil
Jenkins, Hugh (Putney)
Price, William (Rugby)


Castle, Rt. Hn. Barbara
Jenkins, Rt. Hn. Roy (Stechford)
Reed, D. (Sedgefield)


Clark, David (Colne Valley)
John, Brynmor
Roberts, Rt. Hn. Goronwy (Caernarvon)


Cocks, Michael (Bristol, S.)
Johnson, Carol (Lewisham, S.)
Robertson, John (Paisley)


Concannon, J. D.
Johnson, James (K'ston-on-Hull, W.)
Roderick, Caerwyn E.(Br'c'n&R'dnor)


Cox, Thomas (Wandsworth, C.)
Johnson, Walter (Derby, S.)
Rodgers, William (Stockton-on-Tees)


Crosland, Rt. Hn. Anthony
Jones, Barry (Flint, E.)
Roper, John


Cunningham, G. (Islington, S. W.)
Jones, Dan (Burnley)
Roes, Rt. Hn. William (Kilmarnock)


Cunningham, Dr. J. A. (Whitehaven)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Shore, Rt. Hn. Peter (Stepney)


Dalyell, Tam
Jones, Gwynoro (Carmarthen)
Short, Mrs. Renée (W'hampton, N. E.)


Davies, Denzil (Llanelfy)
Judd, Frank
Sillars, James


Davis, Terry (Bromsgrove)
Kaufman, Gerald
Silverman, Julius


Deakins, Eric
Kelley, Richard
Skinner, Dennis


Defargy, H. J.
Kerr, Russell
Small, William


Dell, Rt. Hn. Edmund
Lambie, David
Smith, John (Lanarkshire, N.)


Dempsey, James
Latham, Arthur
Spearing, Nigel


Doig, Peter
Lawson, George
Spriggs, Leslie


Dormand, J. D.
Lee, Rt. Hn. Frederick
Steel, David


Douglas, Dick (Stirlingshire, E.)
Lewis, Arthur (W. Ham N.)
Stoddart, David (Swindon)


Douglas-Mann, Bruce
Lipton, Marcus
Strang, Gavin


Driberg, Tom
Loughlin, Charles
Summerskill, Hn. Dr. Shirley


Dunn, James A.
Lyon, Alexander W. (York)
Swain, Thomas


Eadie, Alex
McBride, Neil
Taverne, Dick


Edwards, Robert (Bilston)
Mackenzie, Gregor
Thomas, Jeffrey (Abertillery)


Ellis, Tom
Mackie, John
Thomson, Rt. Hn. G. (Dundee, E.)


Evans, Fred
Mallalieu, J. P. W. (Huddersfield, E.)
Thorpe, Rt. Hn. Jeremy


Fernyhough, Rt. Hn. E.
Marks, Kenneth
Tinn, James


Fisher, Mrs. Doris (B'ham, Lady wood)
Marquantd, David
Tomney, Frank


Fletcher, Ted (Darlington)
Marshall, Dr. Edmund
Torney, Tom


Ford, Ben
Mayhew, Christopher
Tuck, Raphael


Fraser, John (Norwood)
Meacher, Michael
Urwin, T. W.


Freeson, Reginald
Mellish, Rt. Hn. Robert
Walker, Harold (Doncaster)



Mendelson, John



Galpern, Sir Myer
Millan, Bruce
Wallace, George


Garrett, W. E.
Miller, Dr. M. S.
Watkins, David


Gilbert, Dr. John
Morris, Alfred (Wythenshawe)
Weitzman, David


Ginsburg, David
Morris, Charles R. (Openshaw)
Wellbeloved, James


Golding, John
Morris, Rt. Hn. John (Aberavon)
Wells, William (Walsall, N.)


Grant, George (Morpeth)
Ogden, Eric
White, James (Glasgow, Pollok)


Grant, John D. (Islington, E.)
O'Halloran, Michael
Whitehead, Phillip


Griffiths, Will (Exchange)
O'Malley, Brian
Whitlock, William


Grimond, Rt. Hn. J.
Orme, Stanley
Willey, Rt. Hn. Frederick


Hamilton, James (Bothwell)
Oswald, Thomas
Williams, Alan (Swansea, W.)


Hamilton, William (Fife, W.)
Paget, R. T.
Williams, W. T. (Warrington)


Harrison, Walter (Wakefield)
Palmer, Arthur
Wilson, Rt. Hn. Harold (Huyton)


Hart, Rt. Hn. Judith
Pannell, Rt. Hn. Charles
Woof, Robert


Hattersley, Roy
Parker, John (Dagenham)



Heffer, Eric S.
Parry, Robert (Liverpool, Exchange)
TELLERS FOR THE AYES:


Hooson, Emlyn
Pavitt, Laurie
Mr. Ernest Armstrong and


Horam, John
Peart, Rt. Hn. Fred
Mr. Donald Coleman.


Houghton, Rt. Hn. Douglas






NOES


Adley, Robert
Chichester-Clark, R.
Fletcher-Cooke, Charles


Alison, Michael (Barkston Ash)
Churchill, W. S.
Fookes, Miss Janet


Allason, James (Hemel Hempstead)
Clark, William (Surrey, E.)
Foster, Sir John


Barber, Rt. Hn. Anthony
Clegg, Walter
Fowler, Norman


Batsford, Brian
Cockeram, Eric
Fraser, Rt. Hn. Hugh (St'fford & Stone)


Bell, Ronald
Cooke, Robert
Gibson-Watt, David


Benyon, W.
Cooper, A. E.
Goodhart, Philip


Berry, Hn. Anthony
Corfield, Rt. Hn. Frederick
Goodhew, Victor


Biggs-Davison, John
Cormack, Patrick
Gorst, John


Blaker, Peter
Critchley, Julian
Cower, Raymond


Boscawen, Robert
Crouch, David
Grant, Anthony (Harrow, C.)


Bossom, Sir Clive
Crowder, F. P.
Gray, Hamish


Bowden, Andrew
Davies, Rt. Hn. John (Knutsford)
Green, Alan


Boyd-Carpenter, Rt. Hn. John
d'Avigdor-Goldsmid, Sir Henry
Gummer, Selwyn


Bray, Ronald
d'Avigdor-Coldsmid, Maj.-Gen. James
Gulden, Harold


Brewis, John
Dean, Paul
Hall, Miss Joan (Keighley)


Brocklefcank-Fowler, Christopher
Deedes, Rt. Hn. W. F.
Hall, John (Wycombe)


Brown, Sir Edward (Bath)
Dixon, Piers
Hall-Davis, A. G. F.


Bryan, Paul
Dodds-Parker, Douglas
Harrison, Col. Sir Harwood (Eye)


Buck, Antony
Dykes, Hugh
Hawkins, Paul


Bullus, Sir Eric
Edwards, Nicholas (Pembroke)
Hay, John


Butler, Adam (Bosworth)
Elliot, Capt. Walter (Carshalton)
Hayhoe, Barney


Carlisle, Mark
Eyre, Reginald
Hicks, Robert


Charmon, Paul
Farr, John
Higgins, Terence L.


Chapman, Sydney
Fell, Anthony
Hiley, Joseph


Chataway, Rt. Hn. Christopher
Fenner, Mrs. Peggy
Hill, James (Southampton, Test)




Hordern, Peter
Monro, Hector
Sproat, lain


Hornby, Richard
More, Jasper
Stainton, Keith


Hornsby-Smith, Rt. Hn. Dame Patricia
Morgan-Giles, Rear-Adm.
Stanbrook, Ivor


Howell, David
Morrison, Charles (Devizes)
Stewart-Smith, D. G. (Belper)


Howel, Ralph (Norfolk, N.)
Mudd, David
Stokes, John


Hunt, John
Murton, Oscar
Stuttaford, Dr. Tom


Hutchison, Michael Clark
Neave, Airey
Tapsell, Peter


Irvine, Bryant Godman (Rye)
Noble, Rt. Hn. Michael
Taylor, Sir Charlese (Eastbourne)


Jenkin, Patrick (Woodford)
Normanton, Tom
Taylor, Edward M.(G'gow, Cathcart)


Jessel, Toby
Onslow, Cranley
Tebbit, Norman


Jopling, Michael
Oppenheim, Mrs. Sally
Temple, John M.


Kellett-Bowman, Mrs. Elaine
Owen, Idris (Stockport, N.)
Thatcher, Rt. Hn. Mrs. Margaret


Kilfedder, James
Page, Graham (Crosby)
Thomas, John Stradling (Monmouth)


King, Evelyn (Dorset, S.)
Parkinson, Cecil (Enfield, W.)
Trafford, Dr. Anthony


King, Tom (Bridgwater)
Peel, John
Trew, Peter


Kinsey, J. R.
Percival, Ian
Tugendhat, Christopher


Knight, Mrs. Jill
Peyton, Rt. Hn. John
Turton, Rt. Hn. Sir Robin


Le Marchant, Spencer
Pink, R. Bonner
Vaughan, Dr. Gerard


Lewis, Kenneth (Rutland)
Powell, Rt. Hn. J. Enoch
Waddington, David


Longden, Gilbert
Price, David (Eastleigh)
Walder, David (Clitheroe)


Loveridge, John
Pym, Rt. Hn. Francis
Walker-Smith, Rt. Hn. Sir Derek


Luce, R. N.
Rawlinson, Rt. Hn. Sir Pete
Wall, Patrick


McAdden, Sir Stephen
Redmond, Robert
Walters, Dennis


McCrindle, R. A.
Reed, Laurance (Bolton, E.)
Ward, Dame Irene


McLaren, Martin
Rees, Peter (Dover)
Warren, Kenneth


Maclean, Sir Fitzroy
Rees-Davies, W. R.
Weatherill, Bernard


Macmilan, Maurice (Farnham)
Renton, Rt. Hn. Sir David
Wells, John (Maidstone)


McNair-Wilson, Michael
Rodgers, Sir John (Sevenoaks)
Whitelaw, Rt. Hn. William


Maddan, Martin
Rost, Peter
Wiggin, Jerry


Madel, David
Russell, Sir Ronald
Wilkinson, John


Marten, Neil
Scott, Nicholas
Wolrige-Gordon, Patrick


Mather, Carol
Scott-Hopkins, James
Wood, Rt. Hn. Richard


Maude, Angus
Shelton, William (Clapham)
Woodhouse, Hn. Christopher


Maxwell-Hyslop, R. J.
Simeons, Charles
Worsley, Marcus


Meyer, Sir Anthony
Sinclair, Sir George



Mills, Peter (Torrington)
Smith, Dudley (W'wick & L'mington)
TELLERS FOR THE NOES:


Mitchell, Lt. Col. C.(Aberdeenshire, W)
Soref, Harold
Mr. Tim Fortescue and


Mitchell, David (Basingstoke)
Speed, Keith
Mr. Hugh Rossi.


Moate, Roger
Spence, John

New Clause 4

ANNUAL REPORT ON WEALTH DISTRIBUTION AND CAPITAL TAXES

The Board shall publish an annual report on the distribution of privately-owned wealth in the United Kingdom and the impact thereon of the taxes on capital.—[Mr. Marquand.]

Brought up, and read the First time.

Mr. David Marquand: I beg to move, That the Clause be read a Second time.
As with the previous new Clause, this one calls for an annual report, and an annual report with more information than that already published by the Inland Revenue. One of our main reasons for suggesting it is that the statistics already published on the distribution of wealth by the Inland Revenue are clearly inadequate and in some respects even misleading.
The second reason for the Clause is that it is clear that the Bill will have, in many respects, a markedly regressive effect on the distribution of wealth, and we believe that the extent of that regres

sive effect should be made clear so that Parliament and the public can know what is happening.
The third reason for the Clause is that, in spite of the inadequacy of the statistics to which I referred, it is reasonably clear that the capital taxes, as they now operate, are in many ways ineffective and that some reform of the system of capital taxation is badly needed. But, in our view, it would be wrong to embark on reform without knowing precisely the facts.
I wish to say a few words about the inadequacies of the information which is published by the Inland Revenue, although I do not wish to belabor the point, since I think that it is generally accepted. Certainly it is accepted by the Inland Revenue, which publishes in the Inland Revenue statistics estimates of the wealth of individuals. These estimates, however, are based on information derived from the existing taxes, and the Inland Revenue itself says that its estimates are subject to wide margins of error.
In the Inland Revenue statistics for 1971 the Board says, in respect of the


tables dealing with the wealth of individuals:
The estimates given here are inevitably subject to fairly wide margins of error and are in some respects incomplete".
It then lists a series of points from (a) to (g) detailing in which respects it believes its own estimates to be subject to error. Therefore, I do not think it can be disputed that the information at present available from Government sources is not adequate for the purposes we have in mind.
Moreover—a point which the Inland Revenue does not make in its official statistics but which is patently true nevertheless—it is notorious that estate duty can easily be avoided because of the absence of an effective gifts tax. Estimates based on the operation of estate duty are therefore bound to be extremely dubious. I therefore hope that, whatever other arguments the Minister of State advances, he will not, should he feel inclined to reject the Clause, use the argument that we already have the information for which the Clause calls and that there is therefore no need for a report of the kind we propose.
As I have said, the second reason for calling for a report is that it is clear, subject to the inadequacies of the statistics I have mentioned, that this Finance Bill is bound to have a highly regressive effect. It seems fairly clear that between 1960 and 1970 there was some movement towards greater equality in the ownership of wealth. In 1960 it was estimated that the wealthiest 1 per cent. of the population owned 42 per cent. of the privately-owned wealth and the top 10 per cent. owned 83 per cent. By 1970, according to a Written Answer which I received from the Financial Secretary last autumn, it was estimated that the wealthiest 1 per cent. owned 34 per cent. of the wealth and that the wealthiest 10 per cent. owned 75 per cent. Thus, it would appear that there was a slight move towards greater equality during the 1960s.
That generalisation is borne out by the Inland Revenue's estimates of the famous Gini coefficient. According to the Inland Revenue, the Gini coefficient moved in an egalitarian direction between the early and late 1960s. One cannot be certain, because the statistics do not enable one to make precise judgments, but the prob

ability is that one reason was that the Labour Government, in the latter part of the 1960s, consciously strove for greater equality in the ownership of wealth.
It is abundantly clear, however, that the present Government, in this Bill, are rapidly and deliberately moving in the reverse direction. Clause 12, dealing with the relief for surtax payers, will cost £38 million in a full year. It is true that not all of it, not even most of it, will go to the owners of investment income, but a substantial part of it will.

Mr. Patrick Jenkin: It is earned income relief.

Mr. Marquand: It is earned income relief, but, as the Financial Secretary him self said in answer to a Parliamentary Question asked by my hon. Friend the Member for Farnworth (Mr. Roper), it will have the effect of giving substantial benefit to people with unearned income in instances when they have both earned and unearned income. The Financial Secretary may have forgotten his own reply, but he told me—

Mr. Jenkin: The hon. Gentleman need not waste the time of the House. I explained in Committee how the effect arose.

Mr. Marquand: The hon. Gentleman accepts that the effect arises and therefore I shall not waste the time of the House. The point is that the Clause gives a significant benefit to property income.
Clause 13, dealing with the disaggregation of children's income, will cost £15 million in a full year. Chapter 3 of the Bill—setting out the new system of personal taxation—lays down that what has been seemed a modest slice of investment income will be charged at the same rate as earned income. We do not know how large that modest slice is, but it became clear in Committee that the Government's interpretation of "modest" is not the same as ours. It is clear that there will be a significant, although unknown, benefit to property income resulting from the new system as the Government intend to work it. That is another reason why a report of this kind is needed.
Clause 52, which carries through the substitution of capital gains tax for betterment levy, will cost £12 million in 1971–72 and £31 million in 1972–73. As became clear in Committee, and in debates on


the Land Commission (Dissolution) Bill, 40 per cent. of the benefit of that reduction is likely to go to a very small number of people. Clause 53 deals with short-term capital gains tax and costs £1,500,000. Clause 56, abolishing the charge to capital gains tax on death, costs, on the Government's own estimate, £15 million.
As the Financial Secretary will admit, that is the effect in the immediate future only. He carefully refrained from saying how great the estimated loss of revenue would be in later years. Yet the yield of capital gains tax is likely to build up over time and therefore the effect of abolishing deemed disposal at death is likely to be very much greater 10 or 15 years from now than it would be next year. There again is an area where the facts are not clear.
6.30 p.m.
Clause 57 raises the estate duty limits and costs £20 million; Clause 58 relates to the payment of estate duty by instalments. The Financial Secretary told us in Committee that the cost, over an unspecified period of years, was likely to be £45 million.
These sums add up to a significant and substantial total. It is clear that the net effect of this Budget is highly regressive. It is also clear that the extent of its re-gressiveness is unknown. The Government are unable or unwilling to say what the full effect of the Clause abolishing capital gains tax on death will be. They are unable or unwilling to say how large the "modest slice" of investment income will be. From the information we have been given by Ministers, it is therefore impossible to tell how great the regressive effect of the Bill will be. We know that it will be significant but not how significant.
That is another reason why a full report should be published by the Board.
My third reason for believing that a report of this kind is necessary is that it is clear that the capital taxes as they work at the moment have not been anything like effective enough. Despite the movement towards greater equality which took place during the 1960s—a movement which is likely to be reversed by this Finance Bill—the degree of inequality which remains is intolerable and

unjustifiable. It is clear that the distribution of wealth owned by individuals in our society is far more unequal than it is in other Western countries. It is far more unequal than in the United States, and the high probability is that it is more unequal than in any other Western mixed economy.

Mr. Higgins: Would the hon. Gentleman give us the source of his information?

Mr. Marquand: Yes. If the Minister of State would care to look up the January-March issues of the "Political Quarterly" he will find a series of articles dealing with many different aspects of the taxation system. One article in that issue, by Professor Atkinson of the University of Essex, examines the taxation of wealth, and compares this country with other countries, and comes without any serious doubt, to the conclusion that I have mentioned. The Minister of State may be able to prove that I am wrong and that other Western countries are no more equal in the distribution of wealth than we are, but I shall be surpised if he can.

Mr. Higgins: The hon. Gentleman is jumping from one thing to another, from the distribution of wealth to whether the taxation system is or is not favourable. He started on the first, moved to the second, and has gone back to the first. I believe I am right in saying that Professor Atkinson did stress that the figures should be interpreted with great caution.

Mr. Marquand: Of course they have to be interpreted with caution. That is one of the reasons why we are asking for adequate information. The Minister of State cannot get out of his difficulties in that way. Professor Atkinson's article makes two things clear. The first is that the taxation of wealth in this country is narrower in scope than it is in many other Western countries. The second is that the distribution of wealth in this country is more unequal than it is in other Western countries. Those two conclusions are not at all inconsistent, indeed they support each other. It is precisely because the taxation of wealth is less effective in this country than elsewhere that the ownership of wealth is more unequal than elsewhere. Both these points are established clearly by Professor Atkinson. If the Minister of State has not read the article I suggest


that he should do so. I think that he will find it convincing.

Mr. Michael Meacher: Would my hon. Friend agree that a number of articles that have appeared by Lampman and Kolko in the "Review of Economic Studies" in the mid- and late 1960s have indicated that the degree of concentration of wealth held by the 1 per cent. or 5 per cent. who are richest is, if anything, twice as great in this country as in the United States?

Mr. Marquand: The authors to whom my hon. Friend is referring are cited in the Atkinson article.
It would be a pity to get too deep into an academic disquisition on all the sources and footnotes in the Atkinson article—[HON MEMBERS: "Hear, hear."] Hon. Members opposite should not cheer that point too loudly. After all, it was the pedantic insistence of the Minister of State on questioning me about the minutiae of the Atkinson article which got us involved in this discussion in the first place. I did not have any intention of going into the Atkinson article in this amount of detail. I was led into that academic bog by the Minister of State. If his hon. Friends want to blame anyone they should blame him.
The other point which is indisputable is that the chief of the capital taxes that we now have, namely, estate duty, has not increased its yield as a proportion of personal wealth anything like as rapidly as would have been expected considering the increases in rates that have taken place over the past 40 years. It has been estimated that in 1927 the revenue from estate duty came to 0·42 per cent. of personal wealth and that in 1966 the figure was 0·43 per cent. of personal wealth. That is in spite of the fact that over that period there has been a significant increase in the rates. The inescapable conclusion is that a massive avoidance of estate duty was built up over the years. One estimate is that in 1966 the total amount of gifts inter vivos which avoided estate duty came to £350 million or a quarter of the total value of estates subject to estate duty in that year. It is impossible to make a precise estimate, but there is no doubt that there has been very considerable avoidance because of the absence of an effective gifts tax.
It is clear, too, that a whole host of other Western countries with economies comparable to our own operate an annual wealth tax. Such a tax does not appear to be inconsistent in any way with the existence of a market economy; it does not appear to have stifled economic growth, to have prevented people from saving, or to have produced a loss of initiative or dynamism on the part of entrepreneurs or of anybody else. Sweden has one of the highest rates of growth in the Western world and has both a gifts tax and a wealth tax. Germany, not normally thought of as a hotbed of Bolshevism, has a wealth tax. The United States buttresses its estate duty with a gifts tax.
There can be no doubt that the scope of our capital taxes puts us way out on a limb in comparison with other countries. I hear the Financial Secretary muttering to his hon. Friend that we are way out on a limb because we have very high rates of estate duty. I entirely take that point. I am not saying that the existing rates of estate duty should necessarily be left unchanged. Not at all. What I am trying to establish is that our present system of estate duty with its combination of very high rates, and great ease of avoidance, has not achieved the purposes which, presumably, it was designed to achieve. Instead it has fortified a stubborn, and continuing inequality in the ownership of wealth which disfigures this society in comparison with other Western societies.
It would not be right at this point to propose a full-blooded scheme of reform in this branch of taxation. All kinds of possibilities need to be examined and discussed during the next few years. One possibility is to have a gifts tax and slightly lower rates of estate duty—a combination or package of that kind. Another suggestion which has many advocates is an annual tax on wealth. A suggestion which I personally find more attractive is that there should be a tax on the transfer of wealth over a person's lifetime. All of these possibilities exist, and many others.
I am not dogmatic about which of them, or which combination of them, should be adopted. What I do say is that reform is clearly needed, that we cannot go on as we are—and if we are to


have reform, then we must have first the information on which to base it. It is in that spirit that I move the Amendment.

Mr. Peter Rees: I hope the hon. Member for Ashfield (Mr. Marquand) will forgive me if I do not follow him in his lengthy analysis of various taxes on capital from which we suffer. I would have thought that the length of the list of those taxes would suggest that it is time they were cut down—on that ground alone; and on that ground alone I welcome the repeal of short-term gains tax. I hope also that the hon. Gentleman will forgive me if I do not follow him in his rather esoteric views and those of the hon. Member for Oldham, West (Mr. Meacher). I would have thought that the new Clause could be objected to on two rather simpler grounds.
First of all, it leads to a massive erosion of the principle of confidentiality. It has always been a principle of our tax system that information given by the taxpayer and received by the Revenue should be treated in absolute confidence and used primarily for the taxation of that taxpayer alone, in the assessment and collection of tax from him. I am sure that this principle is scrupulously observed by inspectors of taxes in most cases when information is given to them in absolute confidence, but the possible use of some of that information in the compilation of official statistics is not entirely consistent with that, and I hope that on another occasion the Financial Secretary will look into that problem.
In any event, this Clause would lead to a really massive invasion of that principle and would weaken the confidence of taxpayers in the system.
6.45 p.m.
After all, taxpayers have to give a great deal of confidential information about their affairs so that sufficient revenue can be collected for the running of the country. If they are asked to go beyond that they may find that that confidential information could be a prelude to imposing yet further stringent, swingeing taxation, and I would think that the taxpayers will object to what is proposed.
Secondly, there is a practical difficulty, that if this Clause were to be enacted and

were to be effective it would involve every taxpayer in listing annually every single piece of property he owns, and, further to that, having it valued, because if the property were not valued as well as listed the information would be of little use. This proposal goes far beyond the powers with which the Revenue are equipped by the Finance Act, 1965, to implement the capital gains provisions.
The only possible precedent for this Clause is the Domesday Book of the eleventh century. Possibly, as a prelude to our entry into Europe, we should be reminded of our Norman past, and the hon. Gentleman should be reminded, although I am sure that his knowledge of history is far greater than mine, that when the information for the Domesday Book was collected, that met with considerable resistance, even in the eleventh century. I think that it would meet with considerable resistance in the twentieth century.
This Clause is really a prelude to either a gifts tax or a wealth tax, or maybe to both. That is what the hon. Member suggested. I feel it is objectionable on those grounds, and also on the ground that it would impose an unwarranted burden on the taxpayer. Even though my right hon. Friend's Budget has lightened the burden of taxation, the taxpayers are still groaning under a fairly considerable burden of duties and obligations to the Revenue, and this proposal by the hon. Member would weaken the confidence of taxpayers in the whole Revenue system, to the point where it might not operate as effectively as hon. Members on both sides of the House would wish it to operate.

Mr. Meacher: The hon. and learned Member for Dover (Mr. Peter Rees) should not make so much of the problem of assessment and suggest that it would be beyond the powers of the Inland Revenue. He must be aware that other countries, such as Germany, quite effectively get over this problem by operating a system of wealth assessment, with a scissors system to ensure that if there should be under-assessment the taxpayer can be caught on a capital gains tax assessment. I do not think that the objection the hon. and learned Member raises is a serious one.

Mr. Peter Rees: Of course it is possible to devise a system of wealth tax which


might work in a rough and ready way, but that, as I understand it, is not the point of this Clause. As I understand it, the point of this Clause and what the hon. Member wants to extract from all of us is a very detailed and accurate analysis of our wealth for purposes which I would not regard as legitimate.

Mr. Meacher: The purpose for which this Clause is designed is a matter about which people can have differing opinions. I was only saying that the possibility of its implementation is not beyond our powers at present.
I should like to give strong support to my hon. Friend the Member for Ashfield (Mr. Marquand) and his proposals, and for exactly the opposite reasons from those which the hon. and learned Member for Dover has put against them, because I believe that a harbinger of a wealth tax is highly desirable.
One of the main arguments used by my hon. Friend, which I support, is that a strong reason for the new Clause is the widespread existence of tax avoidance. While a full and probing annual report or a national wealth register, clearly, would not eliminate such practices, it could, clearly, be expected to induce a considerable decline in their frequency. I am sure that most hon. Members on this side would support the argument that that is the proper way to do it and not purely by a reduction of taxes. Tax avoidance, however, is not merely a drum with which to beat the rich. It clearly exists, and it exists in a form that contravenes the will of Parliament and any reasonable and proper canons of taxation, whether it is widespread or on a negligible scale.
There are several indications of that. One is the suspiciously large drop in the proportion of property chargeable to estate duty which passes by means of settlement. Another pointer is the extraordinary concentration of wealth in the hands of the youngest generation of adults in their early 20s. Another indicator is the wide and increasing discrepancy between gifts charged to estate duty at the present time and throughout the 1960s and the gifts that were valued for estate duty during the same period.
The latest calculation of the extent of this avoidance was made by Maurice Tait in 1967, when he estimated that the

under-enumeration of wealth in the Inland Revenue statistics due to avoidance amounted to between 34 and 50 per cent. I shall be pleased to give the Minister of State the exact references if he wishes to query this.
By comparing the Inland Revenue figures of personal wealth with net national income over the last 60 years, I have calculated that Tait's figures for under-enumeration may themselves be an under-enumeration of the facts. Even if Tait is right, however, this suggests that wealth today may amount to £110,000 million and not merely the £88,000 million of the latest Inland Revenue figures. This is a huge shortfall and one which must inevitably cause much public disquiet.
It may well be that if all the facts were known, our experience might be found to parallel that of America, where two United States Census Bureau experts, Miller and Herriot, reported three months ago that income and wealth studies which have produced the latest figures of 543 billion dollars had, on closer inspection, missed 76 billion dollars, or fully one-eighth of the total. The top income bracket had been thought to possess 1·8 per cent. of national income but was found on closer inspection to own 11 per cent. The degree of non-dutiability involved in these figures is, clearly, enormous and is not simply a small matter to be easily dismissed. Indeed, official ignorance of the actual position concerning the distribution of wealth is astounding.
On 11th February I asked a series of Questions. I asked the Chancellor of the Exchequer
how many private discretionary and other family settlements are in operation in Great Britain; and what is his estimate of the amount of money covered by such trusts.
I was told:
This information is not available.
I asked the Chancellor:
how many accumulation settlements are currently in existence in Great Britain in favour of infants; what is the total capital value of the sums at present covered by them; and what saving in family liability to income tax, surtax and estate duty he estimates is at present achieved by their use.
That was hardly an unreasonable Question. Again, however, I was told that
This information is not available.


I asked the Chancellor of the Exchequer
what estimates he has made of the annual loss in estate duty on policies of life assurance written on trust under the Married Women's Property Act, 1882".
Again, I was told,
No estimates is available.
I asked the Chancellor
how much death duty he estimates is at present lost each year on account of gifts inter vivos and settlements made in consideration of marriage
and I was told that
No estimate is possible because the information about gifts outside the estate duty net is incomplete.
I asked the Chancellor—and this is precisely the kind of information that might be provided by implementation of the new Clause:
How much tax and estate duty he estimates is avoided as a result of covenants taken out in favour of their grandchildren by persons with an annual income over £5,000 and with capital holdings in excess of £20,000, respectively.
Again, I was told:
Information on which to base the desired estimates is not available."—[OFFICIAL REPORT, 11th February, 1971; Vol. 811, c. 241–4.]
That shows how little official knowledge there is about the existence, let alone the distribution, of wealth.
To want approximately accurate answers to those questions is not, as the hon. and learned Member for Dover suggested, an unreasonable intrusion into privacy. If it was considered proper under the Companies Act, 1967, that directors' remuneration should be made public on an individual basis, it is surely all the more proper that aggregate figures for wealth, concerning the distribution of the ownership of wealth, should be made public. The public are entitled to know because of the massive overall influence which wealth has over the whole of society.
It has rightly been said that today we take attitudes towards wealth which the Victorians reserved towards sex. It seems to me, however, that there are far more cogent reasons for bringing questions of wealth out into the open than there are for treating sex in that way, although I would not deny that there are reasons for that as well. But since it is the existing supply of capital which deter

mines future wealth, and since, regrettably, the supply is inelastic, it is surely of the most acute importance that more information should be made available to the public about both its distribution and its availability, otherwise public debate is inevitably circumscribed, and in a free democracy there should be public discussion of this issue, which will affect future generations.
There is another powerful reason for having the fuller information which would be supplied as a result of the new Clause. The experience of the last year has made it clear beyond doubt that demand management will not succeed except within the context of some kind of incomes policy. It is, I believe, equally clear that in the present climate of Britain an incomes policy will not succeed unless all sources of earning power open to all sections of the community are brought out into the open.
It can be said at once that an undoubted quid pro quo that will be exacted for wage planning is precisely a controlled reduction of the enormous inequalities of wealth in our society today. There is at present no measure available available by which this could be done except in the crudest manner. The Gini coefficients, to which my hon. Friend referred, are far too indiscriminate and depend upon the all-inclusiveness of the wealth encapsulated in the Inland Revenue figures, a characteristic which is clearly lacking in most figures.
No analysis of the distribution of wealth has been undertaken independently of the Inland Revenue figures since the study done by Lydall and Tipping, which related to 1954 and is now obviously dated. Yet their finding that the richest 1 per cent. owned 81 per cent. of company stocks and shares and that 5 per cent. owned 96 per cent. of company stocks and shares seems to me to be interesting enough for the public to be told a great deal more and on a regular, systematic, official basis and not by the chance result of a private academic study. If, however, one asks, as one has done, how the position has changed since that time, the official answer is, "We do not know."
A full annual report on wealth would, therefore, open to public discussion a matter which is entirely shrouded in mystery, a situation which is entirely


unhealthy if full and willing communal support for an overall raising of the level of national resources is to be obtained. This in itself seems to me to be a perfectly adequate justification for the new Clause, but it is, as I have said, buttressed by the need to satisfy public disquiet about the distortions created by tax avoidance.
If the Government in appointing the Fisher Committee have shown themselves to be sensitive to the relatively few hundreds of thousands of £s that are no doubt mis-spent as a result of the fraudulent claiming of social service benefits they should show themselves to be far more sensitive to the much greater haemorrhage of funds which undoubtedly results from these dubious and anti-social manipulations of wealth. A full and probing annual report on wealth would be an earnest of the Government's intention to put a stop to these practices too.

7.0 p.m.

Mr. Martin McLaren: I can state my objections to the new Clause in a short compass. There are already a great many published figures. There are, for example, tables showing the annual yield from estate duty, from capital gains tax and from surtax, which is an income tax which has some bearing on this subject. An annual report on the distribution of privately-owned wealth would involve a valuation of the assets of taxpayers which would be unwieldy and difficult to achieve. On philosophical grounds, it may not be fair for society to include some rich men, but they do make charitable gifts. Looking back on previous generations, I say to the hon. Member for Oldham, West (Mr. Meacher) that if William of Wykeham had not been a rich man he and I would not have benefited from his liberality, and New College, Oxford, and Winchester College would never have been founded.
The Socialists like having more civil servants doing more work and producing yet further reports. Those who have spoken in favour of the Clause are using it as a peg on which to hang their views on the distribution of wealth. The figures that we already have are enough. On those grounds I am not in favour of the new Clause.

Mr. John Cronin: The hon. Member for Bristol, North-West

(Mr. McLaren) made an interesting speech. It is refreshing to notice that the only argument he could produce for having people in the community who are very much richer than others was that William of Wykeham in the thirteenth century was able to found Winchester College and New College. That was a charmingly archaic aspect of his speech.
We on this side of the House, who take this matter more seriously, feel real disquiet at the figures given by my hon. Friend the Member for Ashfield (Mr. Marquand) in the admirable speech with which he moved the new Clause. It is very unsatisfactory that 1 per cent. of the population owns one-third of the personal wealth of the population, and 10 per cent. own 75 per cent. I do not think that anyone contests those figures. The Minister of State disagreed that we were unique among Western industrial countries in the grossly unequal distribution of wealth. All the evidence we have so far is consistent with the view of my hon. Friend the Member for Ashfield that as a Western industrial country we are one of the worst in the grossly unequal distribution of wealth. I have no doubt there are other countries much worse in this respect than ourselves, countries like Spain, some of the South American countries and the various banana republics, but it is very unsatisfactory that this gross inequality still exists in a modern industrial country like ours.
My hon. Friend the Member for Ashfield pointed out that the Finance Bill which we are discussing will greatly increase the inequalities of wealth, and this is evidently true. The relief of surtax, the aggregation of children's taxation, capital gains tax to be used instead of betterment levy, the abolition of capital gains lax at death—all these will increase the inequalities of wealth by hundreds of millions. This we must expect to some extent from the present Government but it is surprising that the Government should refuse to have a mere investigation into the distribution of wealth.
It seems at first most odd that there has been no real change in the distribution of wealth in spite of estate duty which has been levied in increasing proportions for over a generation. There are reasons for this. One reason is that


there is no adequate gift tax and, consequently, it is possible for wealthy men to give away a large proportion of their income provided they do so in conformity with the laws about inter vivos gifts.
Another effect is the continuous rise in the price of equity shares which over a long period has made estate duty entirely derisory. I agree with the Financial Secretary that there has been some recent short-term decrease but, nevertheless, there has been a gradual gigantic increase in the value of equity shares, and that alone has made nonsense of estate duty by increasing the unequal distribution of wealth. There is alse the 40 per cent. reduction of estate duty for property held in the form of agricultural 'and and forest land. Every rich man makes sure that he holds a substantial proportion of his wealth in the form of agricultural or forest land, because that ensures a tremendous benefit to his heirs. Finally, there is the question of discretionary trusts and covenants for grandchildren. This has been reduced in scope to some extent but, nevertheless, covenants over the last 20 years or so have immensely increased the unequal distribution of wealth, and will probably continue to do so to a limited extent.
We on this side of this House find that there is a strong case for reform. There is a strong case for having some form of gift tax, and a strong case for some form of wealth tax. We regard these gross differences of wealth in the community as socially repugnant. This is the basic difference in philosophy between this side of the House and hon. Gentlemen opposite.
This grossly unequal distribution of wealth has immense social consequences, of which the most important is the overt and also the hidden hostility between trade unionists and industrialists. This is probably one of the most serious causes of our present economic difficulties.
No one would deny that to a very large extent inflation is caused by increases in wages unaccompanied by productivity. That is a truism that everyone will accept, though some may make qualifications. The only way to overcome this state of things in any kind of democratic society will be by obtaining

the co-operation of trade unionists. How can any Government obtain that cooperation when there is this obvious gross difference of enormous wealth and luxury and ostentatious high living on one side—[Interruption.]—and, on the other side, people living on what are barely subsistence incomes?
Hon. Members opposite may laugh, but that there should be 10 per cent. of our population living in circumstances of intolerable economic misery is a disgrace to the country. There is nothing funny about it at all. That there should be this fantastic contrast between ostentatious wealth on one side and the submerged tenth of the population living in miserable poverty on the other is a national scandal. It will discourage in every possible way trade unionists cooperating with the present Government, or any other Government, if such a situation continues.
I therefore suggest that there is a tremendous social need to reform the present situation of gross differences in personal wealth, if only to improve our economic difficulties and get more cooperation from the trade union movement, quite apart from questions of Socialist philosophy.
I hope that the Minister of State will agree to this very modest request. We ask only for information, and I am sure that the cost of getting that information would be very small. It could be obtained by hon. Members on this side putting down questions or writing large numbers of letters, but that would be a laborious and uneconomic method. It would be so much simpler if the Government would get an annual report making the situation completely clear.
Surely the Government approve in principle of the existence of estate duty and of capital gains tax—otherwise, presumably, they would abolish both completely. If they approve of those taxes, why do they not want any information about their effect? There may be some wealthy people who feel they have been unfairly treated and would like information themselves on the subject. Surely the Government are interested in how these various types of capital tax affect the economy? That being so, the Government themselves would in their own interests be well advised to accept the Clause.
I suggest that what we seek is something which would improve the whole body of economic knowledge. Fiscal administrative knowledge would be greatly added to if we could have this simple information which could be obtained easily and at relatively small cost. Unless the Government have something to hide, unless they intend to persist in a grave lack of frankness about something so vital to our economy, the Minister of State should accept the Clause.

Mr. Kenneth Lewis: Until I heard the hon. Member for Loughborough (Mr. Cronin) I had no intention of speaking. I do not know whether he has been to the South of France or to Spain over the weekend and has been meeting the wrong people, but though he finished by saying that he wanted information, most of his speech seemed to indicate that he had already made up his mind that anything the Labour Government had done to help the poor in the community was worse than useless, because the only Government so far to have done anything to help the lower one-tenth are my right hon. Friends, who have just done that in this Budget.

Mr. Cronin: I do not wish to be rude to the hon. Member, but if he really believes that the present Government will be more helpful to the submerged tenth than were their predecessors, it is a very short intellectual step to believing that the earth is flat.

Mr. Lewis: The fact is that it is the present Government which have provided additional income for those with whose incomes are below what it is considered reasonable to live on. Those people with families get an additional income, which they certainly did not get under the Labour Government.
7.15 p.m.
It was to be expected that hon. Members opposite would press for some form of redistribution of wealth—a gifts tax. One expects that when they next provide a programme for the country they will want to introduce such a tax. I would not very much mind a gifts tax if it took the place of what I consider to be overall an over-high estate duty rate. If there were an equalisation in this respect no one would greatly complain; but they

would complain if there were a gifts tax on top of all the other taxes, including estate duty.
One of the problems under both the previous Government and this is that we cannot get an equalisation of capital resources while we have such a high rate of surtax. It is extraordinary to note that hon. and right hon. Members opposite never suggest a reduction in surtax. Not only that, but they complain when we ease the rate. If they will look at company reports they will find that at present all the large companies are seeking opportunities for their junior directors and executives to buy into their companies—to get shares.
These companies realise that because surtax rates are so high on incomes of £5,000 and above, it is very difficult for young men to get a stake in the firm for which they work. Therefore, at annual general meetings they ask shareholders to approve various schemes which enable those executives to buy in shares in the company with special arrangements for paying for them over a period. If hon. Members opposite want to equalise the distribution of capital they should look seriously at their own attitude to surtax, and agree that those who are running our great companies should have an opportunity to acquire a stake in the shareholding.

Dr. John Gilbert: If it is so difficult for people to acquire capital under the present system of taxation, is it not therefore a fact that all those who are obtaining an advantage are getting the benefit of large sums of inherited capital, which is what the Clause is about?

Mr. Lewis: But the people I am talking about do not have any inherited capital. The fact is that if surtax rates were not so high, those to whom I am referring would have the opportunity to go at least some part of the way towards acquiring small fortunes equal to those who have already got them.
If hon. Members opposite decide to impose a gifts tax on top of penal estate duty, and if they intend to deal with covenants and gifts inter vivos, they will simply create a situation in which large numbers of people will send their wealth abroad. Some of them do so now—there is nothing to prevent it. But what the


country needs at present is an increase in investment, and much of this investment comes from those with large amounts of money.
What is the difference between a capital sum of, say, £100,000 or even £50,000 and £250,000, £500,000 or £1 million? A man needs only three meals a day. At most, he can have them at more expensive restaurants than other people. He may also have a bigger house and a better motor car. However, when he has done all that, he has to invest his money and he puts it into industry.
Most of the wealth in this country is creative of more wealth. Those who have large amounts of money get more money because they put it into industry and it increases in value. It certainly provides them with larger capital resources, but it also provides industry with the means to grow and to employ more and more people and, if it is prosperous, at better rates of pay. If we had some of that capital now, we would find unemployment coming down from over 700,000 to a much lower figure of 300,000 or 400,000.
The incentive to acquire wealth in a free enterprise society is necessary to the growth of industry. The sooner right hon. and hon. Gentlemen opposite recognise that, the better. When they talk about killing the rich, they had better be careful that, in so doing, they do not create a situation where the rich decide to scatter and we have no one left to stimulate industry to the benefit of the country as a whole.

Mr. Higgins: I think this may reasonably be described as having been a fascinating debate. We have witnessed some remarkably prejudiced viewpoints by hon. Members opposite backed by a mass of reference to academic writings. However, when one referred to the footnotes, there seemed to be some reluctance to go into the details. It is important, if we are to quote this or that particular study, to include some of the qualifications which are made as well as referring to the broad conclusions which the author thereof may have drawn. I shall have something more to say about that later.
The hon. Member for Oldham, West (Mr. Meacher) was nothing if not pre

dictable. One of his remarks which struck me was that the wealth register would reduce tax avoidance. This, like many of his remarks, was asserted without being proved. I listened with greater intensity at that point and was disappointed that he did not enlarge upon it in his subsequent remarks.
We have had a wide-ranging debate on this new Clause, as on the previous one. The Opposition have put down a new Clause which, though mentioned in the first two or three minutes of the speech of the hon. Member for Ashfield (Mr. Marquand), was diverted to whatever hon. Gentlemen opposite wanted to raise in the general discussion. I hope that I shall not be regarded as being unfair if I therefore treat the new Clause on its merits as a new Clause.
Although the new Clause asks for an annual report, apart from the opening remarks of the hon. Member for Ashfield, no one has stressed why such a report should be an annual report. Yet this surely, from the amount of work which would be involved, is an important factor which needs to be taken into account.
On the broad issues which have been raised, the great philosophical difference between the two sides of the House is that we on this side are concerned with building up wealth, whereas hon. Gentlemen opposite are merely concerned with redistributing it. That being so, we ought to look at the new Clause in the context of what is undoubtedly and clearly recognised to be the great difference between us.
I was sorry that the hon. Member for Ashfield engaged in some somewhat heavy rhetoric in talking about a degree of inequality which was intolerable and utterly unjustifiable. It is significant that this is at the end of a period, apart from last year, of Labour Government which had been going for some years. It is strange, in view of the sudden enthusiasm for the idea of a wealth register of this kind, that this should be the first occasion since I came to this House in 1964 on which this topic should arise, although there were many other occasions on which hon. Gentlemen opposite, when on this side of the House, could have raised it.
I turn now to the statistics which are already published. The estimates of wealth which appear in the Inland


Revenue statistics are based on estate duty statistics. A great many things are assumed in reaching those calculations, including that estates passing on death are a representative sample both in number and in value of the property of individuals. It is recognised that they are subject to fairly wide margins of error and are in some respects incomplete. None the less, my hon. Friend the Financial Secretary, in answer to a Question by the hon. Member for Ash-field on 27th October last, gave an indication of the broad distribution of wealth so far as it can be established from available data. He also referred to the Gini coefficient, which is a broad indicator of the degree of inequality of wealth. In this context, it is worth pointing out that this coefficient as an indication of the trend is, on the whole, a fairly reliable indicator. Individual years may vary, but as a broad indication of the trend it is a good indicator which has changed little. The House will recall that whereas in 1960 the coefficient was 76, by 1968 it had declined to 68. Therefore, there is a considerable trend towards less inequality of wealth.
One point which has been raised is that it is a question of what one regards as a reasonable trend in this context. Professor Atkinson says in his conclusion in his article that there is no clear evidence of a rapid reduction in inequality over time. I think that the kind of trend which I have described, a Gini coefficient of concentration going from 76 in 1960 down to 68 in 1968, is indeed a fairly rapid decline. I think that this is a better indicator than many which we have had.

Mr. Marquand: I think that I conceded that point in what I said. Surely the hon. Gentleman accepts that the Inland Revenue itself pointed out, in the very publication from which he is quoting, that necessarily its estimates of the Gini coefficient had been based on the data that it gets from the taxes which it operates at present. It then goes on to list a whole series of defects in these data.

Mr. Higgins: Yes. I have already stressed that a number of assumptions are made. The point which I am endeavouring to make is that, as an indication

of the trend, the Gini coefficient is fairly reliable. Although there are imperfections in the basic data, taking a run of years these tend to even out.
I turn now to what seems to be the crux of the case. The Inland Revenue is endeavouring to improve the statistics whenever possible. There have been criticisms, for example, of the statistics as they stand. One comment was that they do not include wealth the subject of discretionary trusts. Such wealth did not attract estate duty on the death of a discretionary beneficiary until the law was altered in the Finance Act, 1969. Following the alteration in the law, the amounts held on discretionary trust will be reflected in the published figures. It will take time, but the data will be correspondingly improved.
The crux of the matter is whether we ought to produce this kind of data in an annual form. It is to that question that I want to devote my concluding remarks. Before doing so, I should like to answer the various allegations which have been made about whether the Budget is excessively regressive, whether it is a rich man's Budget, and so on. These points have been debated repeatedly in Committee, and my hon. Friend the Financial Secretary has dealt with them in great detail. In our view, the Budget meets the needs of the time, and we do not accept the views which have been put forward by hon. Gentlemen opposite in this respect. I should be out of order, Mr. Speaker, if I pursued that point further, but I felt it right to place that clearly on the record.
7.30 p.m.
On the need for such an annual report, there were big differences between the two sides of the House about the cost of producing such data. The hon. Member for Loughborough (Mr. Cronin) seemed to think that it would be absolutely trivial. My hon. and learned Friend the Member for Dover (Mr. Peter Rees) was much closer to the mark when he said that a great deal of work would be involved and that one would effectively have to carry out a census of wealth which would necessarily mean that every body would have to estimate their wealth and this would necessarily raise very difficult questions of valuation. This is surely something that we ought


to take into account. Clearly, to a very considerable extent it depends on the reason why such a census of wealth conducted annually is or is not justified. Many hon. Members opposite made no secret of the fact that they felt that a wealth tax would be a desirable introduction into our tax system. One can understand that they may well feel that such a census would be justified in that case. As my hon. Friend the Financial Secretary made clear in Committee, this is not our view, and we consider that it would not be justified to expend the resources necessary to conduct a comprehensive survey of the kind which hon. Members opposite seem to have in mind.
In this context it is not irrelevant to note that the trend in the Gini coefficient, to which I have referred, has been pretty constant over the years, and, moreover, that the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) did not seem to be persuaded when he was Chancellor by the arguments now being put forward from the Opposition Front Bench; indeed, he made it pretty clear on one occasion that he did not feel that the expense of such an operation would be justified. Such a proposal did not appear in the Labour Party's election manifesto.
It seems to us that this proposal is not one which, in the present fiscal situation, ought to be supported by the House. I hope that the House will reject the new Clause.

Mr. Marquand: With your leave, Mr. Speaker, and that of the House, I should like to reply briefly to what the Minister of State has said.
I found the hon. Gentlemans' reply extremely disappointing and rather below his usual standard, if I may say that without presumption. He seemed to be unclear about whether he was in favour of greater equality in the distribution of wealth. He began by saying that there was a philosophical gulf between the two

sides. Then he pointed to the movement of the Gini coefficient, and appeared to take pride in the fact that it had moved in an egalitarian direction under the last Conservative Government. It was not clear where he stood on that point.

The other major argument was that the Labour Government had not introduced the sort of taxes which have been discussed by my hon. Friends in this debate. I remind the Minister of Stale that the Labour Government introduced the capital gains tax and the aggregation of children's income, tightened up the loopholes in estate duty and, in general, moved in the direction which the present Government are moving away from.

I take up two other points made by my hon. Friends which seem to be of central importance to the philosophical gulf to which the Minister referred. As my hon. Friend the Member for Loughborough (Mr. Cronin) said, if we are to obtain the co-operation of working people in the operation of any kind of incomes policy, we have to demonstrate that we are moving in the direction of greater social justice and greater equality in our society.

It is not only from the point of view of a philosophical commitment to greater equality and social justice that my hon. Friends and I believe that the taxes on capital should be reformed and that the information should be produced to enable such a reform to be carried out; we believe also that that reform is necessary because the experience of the past year has shown that a regressive and reactionary Government are incapable of running the economy efficiently, quite apart from moral and philosophical considerations.

Because we believe this and because we find, in terms of that belief, that the reply of the Minister of State was disappointing and unsatisfactory, my hon. Friends and I will support the new Clause in the Division Lobby.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 151, Noes 183.

Division No. 407.]
AYES
[7.35 p.m.


Allaun, Frank (Salford, E.)
Blenkinsop, Arthur
Carmichael, Neil


Allen, Scholefield
Booth, Albert
Clark, David (Colne Valley)


Archer, Peter (Rowley Regis)
Bradley, Tom
Cocks, Michael (Bristol, S.)


Ashton, Joe
Brown, Hugh D. (G'gow, Provan)
Coleman, Donald


Barnett, Joel
Buchan, Norman
Concannon, J. D.


Bishop, E. S.
Campbell, I. (Dunbartonshire, W.)
Crosland, Rt. Hn. Anthony




Cunningham, G. (Islington, S. W.)
Jay, Rt. Hn. Douglas
Palmer, Arthur


Cunningham, Dr. J. A. (Whitehaven)
Jenkins, Hugh (Putney)
Pannell, Rt. Hn. Charles


Dalyell, Tam
Jenkins, Rt. Hn. Roy (Stetchford)
Parker, John (Dagenham)


Davidson, Arthur
John, Brynmor
Parry, Robert (Liverpool, Exchange)


Davies, Denzil (Llanelly)
Johnson, Carol (Lewisham, S.)
Pavitt, Laurie


Davis, Terry (Bromsgrove)
Johnson, Walter (Derby, S.)
Pendry, Tom


Deakins, Eric
Jones, Barry (Flint, E.)
Pentland, Norman


Delargy, H. J.
Jones, Dan (Burnley)
Price, J. T. (Westhoughton)


Dell, Rt. Hn. Edmund
Jones, Rt. Hn. SirElwyn (W. Ham, S.)
Price, William (Rugby)


Dempsey, James
Jones, Gwynoro (Carmarthen)
Reed, D. (Sedgefield)


Doig, Peter
Judd, Frank
Roberts, Rt. Hn. Goronwy (Caernarvon)


Dormand, J. D.
Kaufman, Gerald
Robertson, John (Paisley)


Douglas-Mann, Bruce
Kerr, Russell
Roderick, Caerwyn E.(Br'c'n&amp;R'dnor)


Driberg, Tom
Lambie, David
Roper, John


Eadie, Alex
Latham, Arthur
Ross, Rt. Hn, William (Kilmarnock)


Edwards, Robert (Bilston)
Lawson, George
Sandelson, Neville


Ellis, Tom




Evans, Fred
Lee, Rt. Hn. Frederick
Sillars, James


Ferynhough, Rt. Hn. E.
Lewis, Arthur (W. Ham, N.)
Silverman, Julius


Fisher, Mrs. Doris (B'ham, Ladywood)
Loughlin, Charles
Skinner, Dennis


Fletcher, Ted (Darlington)
Lyons, Edward (Bradford, E.)
Small, William


Ford, Ben
Mabon, Dr. J. Dickson
Smith, John (Lanarkshire, N.)




Spearing, Nigel


Fraser, John (Norwood)
McBride, Neil
Spriggs, Leslie


Freeson, Reginald
Mackenzie, Gregor
Stoddart, David (Swindon)


Galpern, Sir Myer
Mackie, John
Strang, Gavin


Garrett, W. E.
Mallalieu, J. P. W. (Huddersfield, E.)
Summerskill, Hn. Dr. Shirley


Gilbert, Dr. John
Marks, Kenneth
Swain, Thomas


Ginsburg, David
Marquand, David
Taverne, Dick


Golding, John
Marshall, Dr. Edmund
Thomson, Rt. Hn. G. (Dundee, E.)


Gourlay, Harry
Mayhew, Christopher
Tinn, James


Grant, John D. (Islington, E.)
Meacher, Michael
Torney, Tom


Hamilton, James (Bothwell)
Mellish, Rt. Hn. Robert
Tuck, Raphael


Hamilton, William (Fife, W.)
Mendelson, John
Wallace, George


Hamling, William
Millan, Bruce
Watkins, David


Hannan, William (G'gow, Maryhill)
Miller, Dr. M. S.
Wellbeloved, James


Hardy, Peter
Morgan, Elystan (Cardiganshire)
Wells, William (Walsall, N.)


Hart, Rt. Hn. Judith
Morris, Alfred (Wythenshawe)
White, James (Glasgow, Pollok)


Hattersley, Roy
Morris, Charles R. (Openshaw)
Whitehead, Phillip


Heffer, Eric S.
Morris, Rt. Hn. John (Aberavon)
Whitlock, William


Hooson, Emlyn
Murray, Ronald King
Williams, Alan (Swansea, W.)


Horam, John
Ogden, Eric
Wilson, Rt. Hn. Harold (Huyton)


Houghton, Rt. Hn. Douglas
O'Halloran, Michael
Woof, Robert


Howell, Denis (Small Heath)
O'Malley, Brian



Hughes, Mark (Durham)
Orme, Stanley
TELLERS FOR THE AYES:


Hughes, Robert (Aberdeen, N.)
Oswald, Thomas
Mr. Ernest Armstrong and


Janner, Greville
Paget, R. T.
Mr. James A. Dunn.




NOES


Adley, Robert
Corfield, Rt. Hn. Frederick
Hay, John


Alison, Michael (Barkston Ash)
Cormack, Patrick
Hayhoe, Barney


Allason, James (Hemel Hempstead)
Critchley, Julian
Hicks, Robert


Atkins, Humphrey
Crouch, David
Higgins, Terence L.


Baker, W. H. K. (Banff)
Crowder, F. P.
Hiley, Joseph


Barber, Rt. Hn. Anthony
Curran, Charles
Hill, James (Southampton, Test)


Batsford, Brian
d'Avigdor-Goldsmid, Sir Henry
Holt, Miss Mary


Bell, Ronald
d'Avigdor-Goldsmid, Maj.-Gen. James
Hordern, Peter


Benyon, W.
Dean, Paul
Hornby, Richard


Berry, Hn. Anthony
Deedes, Rt. Hn. W. F.
Hornsby-Smith, Rt. Hn. DamePatricia


Biggs-Davison, John
Dixon, Piers
Howell, David (Guildford)


Blaker, Peter
Dodds-Parker, Douglas
Howell, Ralph (Norfolk, N.)


Boardman, Tom (Leicester, S. W.)
Dykes, Hugh
Hunt, John


Boscawen, Robert
Edwards, Nicholas (Pembroke)
Hutchison, Michael Clark


Bossom, Sir Clive
Eyre, Reginald
Irvine, Bryant Godman (Rye)


Bowden, Andrew
Farr, John
Jenkin, Patrick (Woodford)


Boyd-Carpenter, Rt. Hn. John
Fell, Anthony
Jessel, Toby


Bray, Ronald
Fenner, Mrs. Peggy
Kellett-Bowman, Mrs. Elaine


Brinton, Sir Tatton
Fletcher-Cooke, Charles
Kilfedder, James


Brock[...]ebank-Fowler, Christopher
Fookes, Miss Janet
King, Evelyn (Dorset, S.)


Brown, Sir Edward (Bath)
Foster, Sir John
King, Tom (Bridgwater)


Bryan, Paul
Fowler, Norman
Kinsey, J. R.


Buchanan-Smith, Alick (Angus, N&amp;M)
Gibson-Watt, David
Knight, Mrs. Jill


Buck, Antony
Goodhart, Philip
Le Marchant, Spencer


Butler, Adam (Bosworth)
Gorst, John
Lewis, Kenneth (Rutland)


Carlis[...]e, Mark
Gower, Raymond
Longden, Gilbert


Chapman, Sydney
Grant, Anthony (Harrow, C.)
Loveridge, John


Chataway, Rt. Hn. Christopher
Gray, Hamish
Luce, R. N.


Chichester-Clark, R.
Green, Alan
McAdden, Sir Stephen


Churchill, W. S.
Gummer, Selwyn
McCrindle, R. A.


Clark, William (Surrey, E.)
Hall, Miss Joan (Keighley)
McLaren, Martin


Clarke, Kenneth (Rushcliffe)
Hall, John (Wycombe)
Maclean, Sir Fitzroy


Clegg, Walter
Hall-Davis, A. G. F.
Macmillan, Maurice (Farnham)


Cooke, Robert
Harrison, Col. Sir Harwood (Eye)
McNair-Wilson, Michael


Cooper, A. E.
Hawkins, Paul
Maddan, Martin




Madel, David
Price, David (Eastleigh)
Taylor, Sir Charles (Eastbourne)


Marten, Neil
Pym, Rt. Hn. Francis
Taylor, Edward M.(G'gow, Cathcart)


Mather, Carol
Rawlinson, Rt. Hn. Sir Peter
Tebbit, Norman


Maude, Angus
Redmond, Robert
Temple, John M.


Meyer, Sir Anthony
Reed, Laurance (Bolton, E.)
Thatcher, Rt. Hn. Mrs. Margaret


Mills, Peter (Torrington)
Rees, Peter (Dover)
Thomas, John Stradling (Monmouth)


Mitchil, Lt.-Col. C.(Aberdeenshire, W)
Rees-Davies, W. R.
Trafford, Dr. Anthony


Moate, Roger
Renton, Rt. Hn. Sir David
Trew, Peter


Monro, Hector
Rossi, Hugh (Hornsey)
Tugendhat, Christopher


Montgomery, Fergus
Rost, Peter
Turton, Rt. Hn. Sir Robin


More, Jasper
Russell, Sir Ronald
Vaughan, Dr. Gerard


Morgan-Giles, Rear-Adm.
Scott, Nicholas
Waddington, David


Morrison, Charles (Devizes)
Scott-Hopkins, James
Walder, David (Clitheroe)


Mudd, David
Shelton, William (Clapham)
Walker-Smith, Rt. Hn. Sir Derek


Murton, Oscar
Simeons, Charles
Ward, Dame Irene


Neave, Airey
Sinclair, Sir George
Warren, Kenneth


Noble, Rt. Hn. Michael
Smith, Dudley (W'wick & L'mington)
Weatherill, Bernard


Normanton, Tom
Soref, Harold
Wells, John (Maidstone)


Onslow, Cranley
Speed, Keith
Wiggin, Jerry




Wilkinson, John


Oppenheim, Mrs. Sally
Spence, John
Wolrige-Gordon, Patrick


Owen, Idris (Stockport, N.)
Sproat, Iain
Wood, Rt. Hn. Richard


Page, Graham (Crosby)
Stainton, Keith
Woodhouse, Hn. Christopher


Parkinson, Cecil (Enfield, W.)
Stanbrook, Ivor
Wylie, Rt. Hn. N. R.


Peel, John
Stewart-Smith, D. G. (Belper)



Percival, Ian
Stokes, John
TELLERS FOR THE NOES:


Pink, R. Bonner
Stuttaford, Dr. Tom
Mr. Tim Fortescue and


Powell, Rt. Hn. J. Enoch
Tapsell, Peter
Mr. Victor Goodhew.

New Clause 5

TAX RELIEF FOR EMPLOYED PERSONS

The expenditure of any person taxable under Schedule E in respect of purchase of overalls, tools of trade, books, professional journals and courses of study, up to a total value of £50 in any year wholly and exclusively incurred for the purposes of his trade, occupation or profession shall be allowed as a deduction from the wages or salary in computing the amount of assessment.—[Mr. Barnett.]

Brought up, and read the First time.

7.45 p.m.

Mr. Barnett: I beg to move, That the Clause be read a Second time.
I suppose it could be said that this is a reasonably generous Clause and that it is, in effect, a device to give £50 of relief to those paying tax under P.A.Y.E. I do not apologise for the fact that the Clause proposes relief of £50 for those paying tax under P.A.Y.E., because those people do not fare so well under the Bill as those paying tax under Schedule D and those at the higher end of the scale.
One of the effects of the Clause would be to remove a reasonable number of taxpayers from paying tax at the threshold. When the Government increased the child allowance by £40 they exempted 200,000 taxpayers from paying tax. Despite this, in 1971–72, 750,000 more people are paying tax than paid tax in 1970–71. This was revealed in an Answer given by the Chief Secretary on 15th June.
One reason why we have tabled the Clause is to seek to put a little balance into a badly balanced Bill, because the Bill gives considerable relief to people paying tax on investment income and to those at the higher end of the scale. I will give examples of relief which the Bill gives to comparatively small numbers of taxpayers. In 1971–72 £38 million is given by means of the 15 per cent. earned income relief to those with incomes of more than £4,005, removing a comparatively small number of taxpayers from surtax and giving a comparatively small number of taxpayers additional earned income relief. There is £12 million relief on the separation of wife's earnings, again to a very small number of taxpayers. There is £9 million of relief for the self-employed paying tax under Schedule D on the annuity relief for the self-employed. There is £15 million on the disaggregation of parent-child income.
There is £3 million of relief to a small number of close companies in relief from shortfall and £1 million of other reliefs to close companies and, as emerged in our debates in Standing Committee, £½ million of that to just 30 close companies—that is, to 30 families; that is, £½ million in retrospective relief. There is £1½ million relief to a small number of people for short-term capital gains. There is the increased car allowance from £2,000 to £4,000, a provision which was not mentioned either in the Budget or on Second Reading.
On top of all this there is the unified tax system which is clearly intended to


give further substantial relief to those paying tax on investment income.
The Financial Secretary will no doubt tell us that the cost of implementing the Clause would be high. I said at the outset that this would be a generous Clause to those paying tax under P.A.Y.E. The fact that it would be a generous provision is no excuse for the Government's refusing to agree to the Clause, because it is open to the Government, if they wish to give relief of this kind, to make the necessary alterations in the Bill to allow it to be done.
Apart from that, everybody other than the Government now recognises that there is a considerable need for more reflation; indeed, kites have been flown over the weekend to the effect that the Government propose to introduce another £1 million into the regions. That is a little belated. It is not very much, anyway, but if the Government want to reflate, to increase demand, and to reduce unemployment, one way would be to give £50 by way of relief for tax purposes precisely to those who would be given it by the new Clause.
The present position is governed by Section 189 of the Taxes Act. That goes back to the famous or infamous Section relating to what should or should not be allowed by way of expenses for Schedule E purposes. It includes the word "necessarily". In order to qualify for allowance for Schedule E purposes an expense must be "wholly, exclusively and necessarily" incurred, unlike expenses for Schedule D purposes, which need to be only "wholly and exclusively" incurred.
At present there is an agreement between the Inland Revenue and certain trade unions under which an allowance is made of £15–I am told that in other trade unions the sum is £10–for tools and overalls. All that happens is that the taxpayer puts a cross in a certain part of his tax return and receives that allowance. He receives it even though he may not have spent the money. It is given to him as a concession. In some cases he may spend the money but the expenditure may not be "necessarily" incurred, as the word has been defined over the years. The Amendment would take the position very much wider. We have deliberately excluded the word "necessarily". The expenditure of up

to £50 would need only to be "wholly and exclusively" incurred.
The last debate on this matter took place in 1957 and was concerned with the question of tools and overalls. It was replied by the then Financial Secretary—now the right hon. Member for Wolverhampton, South-West (Mr. Powell). At that time the debate centred around a word that had been included in a new Clause that was being discussed—the word "reasonably". It was argued that that word would be equally difficult to define. That is true. On this occasion the word "necessarily" has been removed, and the word "reasonably" has not been included. The expenditure would simply have to be wholly or exclusively incurred—in other words, it would be the same definition as is used for Schedule D purposes.
The new Clause would cover other items—books, journals and courses of study. Generally one does not define a specific form of expense; the matter is left to the Revenue and the taxpayer. In the case of Schedule E generally the trade union often agrees a specific type of expenditure which should or should not be allowable. On this occasion we have added additional items because the expense provision is grossly unfair in its working in all sorts of ways.
No tax system can ever be wholly fair and correct; with such a complicated tax system and so many tax laws as ours there are bound to be some occasions when it is never precisely fair as between one taxpayer and another. As it stands at the moment it is very unfair in the professions—for example, in respect of the purchase of books by teachers to enable them to do their jobs better.
The purchase of those books would not be an allowable expense, as the law stands. Equally, technical and professional magazines would not be allowable for tax relief. That applies in accountancy. If I were assessed for Schedule D and I bought journals, magazines and books, they would be wholly allowable for tax relief, but if an accountant who is not in public practice were assessed under Schedule E and bought precisely the same books and journals, that expenditure would not be allowed. He would have to pay for them out of his taxed income.
In the 1957 debate a Conservative Member pointed out that if a solicitor were assessed under Schedule D the books and journals that he bought would be allowable for tax, whereas if he were engaged as a town clerk and bought the same sort of books the expense would not be allowable. The position is grossly unfair between one taxpayer and another—between two taxpayers who are doing a similar sort of work. Moreover, in many cases the income of the man assessed under Schedule E is lower than that of the man assessed under Schedule D.
The question of courses of study never used to be very important. Until a few years ago articled clerks not only did not earn enough to pay tax; they earned nothing at all. Frequently they had to pay premiums to their principals. That situation does not exist today, and articled clerks earn enough to pay tax. But people in my profession pay for their courses of study in a variety of ways. These courses are still largely correspondence courses, and their cost is quite substantial. The cost is not allowable for tax purposes, presumably on the ground that the expense is not incurred in order to earn the money. That is the general principle under which expenses are refused.
In my opinion that is defining the matter a little too narrowly. I should have thought that that aspect of the expense incurred—courses of study for articled clerks and apprentices, who are young men and women out to improve their status, and paying out what to them are considerable sums of money—ought to be reconsidered, and that the least we could do is to allow that sort of expenditure as a deduction for tax purposes. I therefore submit that the Clause would not only go some way to give a better balance to the Bill; in its own right it is worthy of support by hon. Members on both sides of the House.
In the debate in 1957 the then Financial Secretary quoted an argument presented by the Royal Commission. He sought to answer a series of questions that the Royal Commission posed. He said:
Those answers ought to be given correctly with the aid of the formula … The questions were these:—

'are personal tools to be allowed for, if used in preference to those provided by the employer?
'Books additional to those provided?
'Overalls where their use is optional?
'A private car where alternative travelling facilities are provided free?
'Wife's or secretary's wages where the terms of employment do not require their assistance?' "—[OFFICIAL REPORT, 3rd July, 1957; Vol. 572, c. 1045.]
That brings me to the whole question of the use of the word "necessarily" for Schedule E purposes. Whether an expense is allowable or not will turn upon whether an employer says to his employee, "I do not think it is necessary for you to have that overall or those tools"—or, "It is not necessary for you to purchase that journal" —"You can do the job I want you to do without those things". If the employer does not regard them as necessary, the Revenue takes the view that the expense is not allowable.
8.0 p.m.
I accept that there is a problem here administratively in the same sense that there is a problem in regard to all expenses for Schedule D purposes, though on a smaller scale under Schedule D inasmuch as there are fewer taxpayers under Schedule D than under Schedule E. In the circumstances of Schedule D, inspectors of taxes generally have professional people to negotiate with as regards what is or is not an allowable expense, and in any case the definition is broader, without the word "necessarily". None the less, I suspect that it may be argued that, if every taxpayer under Schedule E could claim relief of up to £50, even if the employer did not think it necessary, there might be an administrative problem in negotiating the question between each Schedule E taxpayer and the Revenue. I shall deal with that argument now.
What happens in practice is that trade unions, on behalf of their members, even without the new Clause and with the word "necessarily", are able to negotiate a concession from the Revenue and secure relief of £10 or £15 for tools and overalls. It is not impossible that trade unions, again on behalf of their members, would be able to negotiate under the terms of the new Clause—and much more easily because the word "necessarily" would not be there—an allowance of up to £50.
Perhaps, because of the more substantial figure involved here, the Revenue would be likely to insist on the amount having to be spent, or it might say that it would allow up to, say, £25 and that anything in excess would have to be proved. We know that the Revenue is generally quite flexible in all sorts of ways. It is flexible in the case of Schedule D expenses, for example, in negotiating the level of car expenses and the proportion of private benefit; where the precise amount of private benefit cannot be settled, it agrees a broad percentage with the taxpayer.
I see no reason why that could not be done here, and it would be particularly beneficial at this time when, as I say, taxpayers under Schedule E have not had a fair share of what is being distributed under this Finance Bill. For those reasons, I commend the Clause to the House, confident that it will have not only the support of my right hon. and hon. Friends but the support of many hon. Members on the Government side, too.

Mr. William Clark: I am amazed at the hon. Member for Hey wood and Royton (Mr. Barnett). I should have expected him, with his expert knowledge, to make a better case for a greater expenses allowance without any talk about reflating the economy or producing a better balance in the Budget. If one wants to reflate the economy, one need not play about with the expenses rule under Schedule D or Schedule E. That part of it was just a red herring.
As the hon. Gentleman said, overalls and tools are covered at the moment. There may well be some justification for raising the allowance of £10 or £15 to £20 or £25. However, when he comes to the question of books and journals, the hon. Gentleman is in danger of exaggerating. I leave teachers out of it for the moment. Many employees who have to have professional and technical journals have them provided by the employer. This is allowed under Schedule D, and it does not cost the employee anything.
When he talks about articled clerks and courses of study, the hon. Gentleman treads on dangerous ground. It is one thing to talk about articled clerks—if a professional man improves himself

by passing examinations while he is earning, that is splendid—but what about the doctor who is not earning while he does his training but who—both himself and his family—has to bear the substantial cost of training? That argument does not hold water.
There is some justification in the hon. Gentleman's case in one respect. I feel that the expense claim differential between Schedule E taxpayers and Schedule D taxpayers should be looked at. Also—I hope that my hon. Friend will be sympathetic to this—the complications of our tax laws now, particularly since 1964–I say this in no party sense—are such that the ordinary taxpayer is unable to understand his liability. The Schedule D taxpayer is probably all right, but the Schedule E taxpayer, if he has a mixed income, with earned income and a bit of investment income, must take professional advice to settle his liability.
The time is fast approaching when the Inland Revenue should allow some sort of expense claim against Schedule E emoluments when sums are genuinely paid out for professional advice, whether to an accountant, a bank manager, a solicitor, or whoever may advise the taxpayer on his tax liability.
I utterly refute the hon. Gentleman's argument about putting a bit of balance into the Budget and giving a little more to the small man rather than to the so-called rich. I remind him that the reduction in S.E.T. goes right through the tax range. [Laughter.] It is no good hon. Members joking. It goes right through the tax range. The family man has done very well in this Budget. About £200 has been given to the family man in tax remissions of one form or another, and it is quite wrong to say that only one section of the community has been looked after in this Budget.
I hope that my hon. Friend will resist the new Clause, but I hope that he will say something encouraging about the possibility of investigating the expenses which may be allowed against the Schedule E assessment. I ask him to bear particularly in mind the need which the layman feels to have his tax problems and liabilities explained by professional advisers. I do not say that because I happen to be an accountant and hope to increase my fees. There is no doubt


that the ordinary layman is bemused and bewildered by our tax laws. He must take professional advice, and it would be only equitable and just if, at some time in the future, an allowance were made in respect of the sums which he pays his professional advisers.

Mr. Charles Loughlin: I am always fascinated by the reaction of hon. Members opposite to questions of this kind. Perhaps I have a working-class background which produces a sort of mental blockage in my mind when I listen to such people as the hon. Member for Surrey, East (Mr. William Clark). The Clause is primarily concerned with giving up to £50 in allowance to workers in industry. By a weird twist of intellect the hon. Gentleman manages to suggest that the Minister should look at the cost to the individual taxpayer of obtaining professional advice. I know mainly the ordinary industrial workers to whom the Clause was supposed to relate. I suppose that I know as many of them as any right hon. Member or hon. Member does. Very few of them employ professional tax advisers. It is unreal to introduce the argument that whilst rejecting the Clause the Minister might take into consideration the amount of money paid to an accountant for advice.
Then the hon. Gentleman talked about S.E.T. I am sorry to take up the subject, but we have heard a lot about its effect on the ordinary taxpayer in the past two or three days. The Prime Minister and the Chancellor of the Exchequer have talked about the benefits likely to result from the reductions in S.E.T. I understand that they amount to £1·20 for the male adult assistant in shops and 60p for the female assistant. The minimum sales per male operative are about £120 a week in the distribution industry. A more realistic figure would be about £150. We do not need to be mathematicians to work out that the unit of distribution can concede to the consumer at best one new penny per £ of sales. [Interruption.] The Financial Secretary may wish to intervene.

Mr. Patrick Jenkin: My hon. Friend the Chief Secretary asked me which Amendment we were on, and I replied that it was about Schedule E expenses.

Mr. Loughlin: Exactly, and I apologised at the beginning for speaking about S.E.T., but if the hon. Member for Surrey, East mentions S.E.T. and the Chair does not object I am entitled to answer him. It is a con game.
8.15 p.m.
Just as I have practical knowledge of the effect of S.E.T. in distribution, I have practical knowledge of the effect the Clause would have on industrial workers. My hon. Friend the Member for Hey-wood and Royton (Mr. Barnett) spoke of an allowance of £15 and I corrected him, because in my experience the tax people will allow £10 for overalls. The Clause does refer to overalls. Shop assistants use overalls, and they not only buy them but have to pay to launder them. If he is to be reasonable in his approach to the customer, the average shop assistant will need four sets a year, and his weekly laundering bill will be at least 20p. for each overall. Many assistants also have to buy books. Even in distribution, today it is not a question of somebody obtaining a job as a shop assistant and eventually emerging, after about 27 years, as manager of a shop taking about £500 a week and having a wage of £18 a week. The whole system of distribution has changed. The assistant may well be a trainee manager, and if so his expenses will be far in excess of the cost of the overalls.
I give the following information about what I did before becoming a trade union official not because I want to boast about it but because I think it is germane. Many people in industry are in precisely the same position as I was in then. I was in the fishing industry before I became a trade union official. I wore a white coat and white leggings, and on top of them I wore oilskin leggings and an oilskin apron. I had my white coat and leggings laundered every week. My oilskins were pretty expensive.
I do not know what the hon. Member for Flint, West (Sir A. Meyer) is smiling about. These are the facts of life; I am describing what happens in the fishing industry throughout the country. If the hon. Gentleman thinks it is funny, I should like to know why. These are important facts to be borne in mind in the consideration of a Finance Bill. We are considering a Clause which seeks to obtain relief for people in the reality


of the situation. I know that as a professional person today I can obtain all sorts of reliefs and that my accountant will look after me. I have only to give him the requisite information, and he will ensure that I get every relief possisble. But it is important that we should consider the men in industry—in fishing, distribution or in factories—who do not have accountants just as much as we consider the professional people who have access to professional advice. I believe that the hon. Member for Flint, West, who smiled in a scathing way, is Parliamentary Private Secretary to the Financial Secretary. I remind him that the people in the fishing industry have to meet costs incurred by the purchase of oilskins and the constant laundering of overalls and leggings.
New Clause 5 refers to a value of up to £50. I do not want to talk now about the increased cost of living with hon. Members opposite, although it is the biggest joke of the century. But bearing in mind that the proposal is for a total of up to £50, I think that this is an eminently reasonable proposal. I hope that the Financial Secretary will not skate over the issue but deal with the practical points which arise in the fishing trade or in distribution—indeed, in the whole of industry—because I believe that the proposal for a total of up to £50 is more realistic than the £10 or £15 to which my hon. Friend referred.

Mr. Dalyell: I would like to put forward two cases as sympathetically as I can in the hope that the Government, if not this year then next year, will look sympathetically at the new Clause. The first is the case of the young teacher. Here, I would not follow my hon. Friend the Member for Heywood and Royton (Mr. Barnett) in the general economic merits of the new Clause, although I happen to agree with him. But I would express the value judgment that there is good in itself in young teachers purchasing books and that the possession of books and the ability to build up some kind of a personal library helps them and helps the country indirectly in their profession. New Clause 5 would be an incentive to them to do so.
Without such a provision, it is true that a large number of young teachers would probably start a library of their

own, anyway, but I think that this would have an incentive effect at a critical time, that it would encourage the book-owning habit, which is in itself a value. This is not just my opinion but that of the Educational Institute of Scotland and, doubtless, of a number of other professional organisations. Therefore I hope that the Treasury will talk to Curzon Street and St. Andrew's House about this matter because some of us think that there is real value in the ownership of books and that there should be some tax advantages early on, knowing that people want to take advantage of them and not abuse them or neglect them. There is certain value in the proposal.
The second case is that of the young professional man. As is known to some hon. Members, I work for the New Scientist, and there is no doubt that there is a feeling that many people now going into engineering, for example, are relatively less well paid today than they used to be—incidentally, engineers are finding it much more difficult to get jobs—and that they, too, would benefit greatly from some kind of financial incentive to buy what are not only books but increasingly expensive books.
Ten years ago, as any publisher knows—and here I am not looking straight at the Chief Secretary, although I expect a little sympathy from him on this—books were relatively, even granted the rising cost of living, a great deal cheaper than they are now. But the price of books has soared. I do not blame the publishers; nor do I blame the printers. This is just one of the facts of life. In these circumstances, there is an added reason for the new Clause so that we can help young scientists, young engineers, young technologists and young technicians to own their own books. That would be good for the country and good for British industry.

Mr. Patrick Jonkin: I was surprised to hear the hon. Member for Heywood and Royton (Mr. Barnett) saying, as a result of his researches, that this subject had not been debated since 1957. He himself took part in a debate in 1966 on a very similar proposal.

Mr. Barnett: Mr. Barnett indicated dissent.

Mr. Jenkin: I have the debate here. It is no use the hon. Gentleman shaking his head. He must have been asleep at


the time. But he did, in fact, speak. I have done him the credit of reading his speech. It was on 30th June, 1966, and his speech began in column 2269 of HANSARD. I mention this only because proposals along the lines of new Clause 5 have been put by successive Oppositions to successive Governments and have never been able to find favour, for reasons which I hope to explain.
The Amendment in 1966 was moved by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the exemption proposed was for overalls, tools and books. The amount suggested was £25. New Clause 5 adds professional journals and courses of study, and is for an amount up to £50. I take the point put by the hon. Member for Gloucestershire, West (Mr. Loughlin)—that the proposal is for a total up to £50.
What new Clause 5 seeks to do is to apply the Schedule D rule wholly and exclusively for the purposes of the employment to certain expenses incurred by Schedule E taxpayers. It omits the word "necessarily", to which the hon. Member for Heywood and Royton referred and which appears in the Schedule E rule. It also omits the other very important leg to the Schedule E rule—that the expenses are only allowable if they are incurred in the performance of the duties of the office. It is probably fair to say that more horses fall at that hurdle of being unable to establish that expenses are incurred in the performance of the duties of the office than fall at the earlier hurdle of having to prove that they are necessary, although the rider must succeed in overcoming both hurdles.
8.30 p.m.
My hon. Friend the Member for Surrey, East (Mr. William Clark), while advising me to reject the new Clause, and I was grateful for his support, for I fear that I must advise the House to reject it, asked me to look at the differences in the treatment of Schedule D and Schedule E taxpayers. One must recognise that Schedule E and Schedule D incomes are taxed under different rules because, as the Royal Commission put it in 1955, of the inherent difference between the two types of income. The taxable income is arrived at in different ways and is computed on different principles and is

therefore inevitably taxed under different rules.
Schedule D income is the balance of the profits of a trade or profession, being the difference between the receipts of the trade and the expenses necessary to earn those receipts. The expenses rule uses the words "wholly and exclusively" because the test is not necessity, but commercial expediency.
Unlike the Schedule E taxpayer, the Schedule D taxpayer has no duties within a defined area. He directs his own income-earning activities and he alone is judge as to whether expenditure is for the advantage of the business or profession in which he is engaged. No one else can know, and no one else can decide. All the Inland Revenue can do is, when it has been spent, decide whether the expenditure was wholly and exclusively for the purposes of the trade. This phrase allows the apportionment of an expense which is partly for the purpose of the trade and partly for other purposes.

Mr. J. T. Price: The hon. Gentleman is trying to explain the philosophy which lies behind this system of levying tax differently on Schedule D and Schedule E taxpayers. Would he care to be more explicit and to bring his argument out of the realm of the abstract and to give a positive example? For instance, how would he distinguish in principle between the accountant, or solicitor, or barrister, who needs certain professional books to assist him in carrying out his professional duties and who is taxed on Schedule D and the teacher, or politician, or some other person who is pursuing another profession, or who may be a humble shop assistant, who needs certain technical information? How does he distinguish in principle at the two levels between the two different types of taxpayer? We know what the mechanics are, but we want to get at the principle.

Mr. Jenkin: I am trying to deal with the principle. The hon. Gentleman started by asking, and I willingly accede to his request, that I should explain this in relation to specific cases. May I continue to distinguish in principle between the two categories and then give examples to illustrate my argument?
I have dealt with the Schedule D taxpayer, who, on the whole, directs his


own income-earning activities and decides whether certain expenditure is necessary in order to enable him to earn his profits, and about whom all the Inland Revenue has to decide is whether those expenses were wholly and exclusively incurred for the purpose of earning the profits.
The Schedule E taxpayer, on the other hand, is in a totally different position. Generally he has an employer who deter mines the scope of the employee's duties and who often tells the employee exactly how he is to perform them. In the over whelming majority of cases, the employer it is who provides all the facilities and all the equipment necessary to enable the employee to perform his duties. If the employee incurs expenses in the per formance of his duties, overwhelmingly that expenditure will be paid for by the employer, whether they are travelling expenses—

Mr. Loughlin: Those expenses are not paid for by the employer, and the hon. Gentleman knows it as well as I do.

Mr. Jenkin: I am taking the overwhelming majority of cases. The hon. Gentleman should not argue too specifically from the position of a Member of Parliament. I do not think that we want to go into this too deeply at the present juncture, but as office holders we may be in a somewhat unique capacity in this regard. However, for the most part if the employer sends the employee away, for instance, to a building site, or to join a ship at a different port, or as a travelling salesman to go round the country, travel expenses are paid by the employer. I think that this is generally accepted by the House. But when the employee is required to provide certain facilities or equipment or to meet certain expenses, then under the law he is entitled to a deduction.
The hon. Member for Westhoughton (Mr. J. T. Price) asked me to illustrate this point by giving the difference between, for instance, the accountant in private practice and the teacher employed by an education authority. In general, the accountant must buy his Simon on Income Tax; the lawyer needs to equip himself with the law reports. They pay for them out of their own pocket. They decide whether they should acquire them or rely for them on public or professional libraries. These are inevitably part of the expenses in earning profits.
On the other hand, the teacher in school—and I take the generality of teachers—will be provided with the text books, blackboard, chalk and increasingly nowadays, language laboratory equipment. For domestic science courses, teachers are provided with washing machines and cookers and for secretarial courses they are provided with typewriters. In general, they do not have lo buy these things; they are provided by the employer, the education authority. I shall come later to the point raised by the hon. Member for West Lothian (Mr. Dalyell) because it must be answered. This in general is the difference between the two. The professional man must decide himself whether to incur expenditure to earn profits. In the other instance, the decision is generally made by the employer who provides or pays for the facilities and equipment necessary to enable the employee to carry out his duties.
I come to the question whether we should extend the Schedule E expenses rule in the manner suggested by the new Clause. I make three broad points. First, the existing rule works pretty satisfactorily for the overwhelming number of Schedule E taxpayers, for a number of reasons. First, the flat-rate deductions to which the hon. Member for Gloucestershire, West referred meet many of the expenses which employees are obliged to bear—for example, overalls and tools. The hon. Member for Gloucestershire, West referred to his experience in the fishing industry. The figure which has been agreed with the relevant unions and professional associations for skippers, mates and deck hands on trawlers is £45, which the hon. Member may feel is not unreasonable, and £22 for engineers on trawlers. I could quote all the way down the scale to vehicle spray painters where the negotiated figure is £9.

Mr. Loughlin: I do not want the hon. Gentleman to mislead the House. When one talks about the fishing industry, one does not necessarily talk about deep sea trawling. There is also freshing, curing, salt codding, and so on. I was not talking about skippers. I was unfortunate in that I was a deep sea fisherman apart from working on the inland side of the fishing industry. I was talking about people working on the docks, in the inland wholesale markets and in the inland


retail markets. That has nothing to do with skippers, mates and engineers.

Mr. Jenkin: I was merely giving examples which came from the industry to which the hon. Gentleman referred. A very large number of agreements have been made between the relevant unions and professional associations and the Inland Revenue. The hon. Member for Heywood and Royton has put down a number of questions asking Treasury Ministers to publish the full list in HANSARD. It would be impracticable be cause there are many hundreds of these agreements. I am prepared to answer individual questions about the amounts in any particular case by correspondence.
Perhaps the point is that this is a matter for negotiation between the appropriate trade union or professional association and the Inland Revenue. If in any particular case it is felt that the sum no longer reflects the expenses incurred by the generality of workers in the area, and this is sometimes narrowed down considerably because of conditions of work, it is always open to the union to approach the Revenue to seek to negotiate a higher figure. The Revenue will require to be satisfied that the figure it is being asked to approve represents the necessary expenditure of the individual concerned on the upkeep of tools, provision of overalls and matters of that sort.
There is no desire to try to restrict the figure unreasonably, provided that the Inland Revenue is satisfied that the amounts are being spent and are necessary. In such cases the figure will be agreed without a great deal of difficulty. It must be remembered that these are minimum figures. It is always open to an individual worker, be he a worker in a fish dock or a factory, to prove that in the performance of his duties he has necessarily incurred expenses above the figure which the union has negotiated. He is not bound by the union figure. He can approach the Inland Revenue and negotiate a larger sum—

Mr. Loughlin: No.

Mr. Jenkin: It is all very well for the hon. Gentleman to say "No" but I am stating the rules as they are. If he thinks that I am stating them wrongly I shall be happy to give way.

Mr. Loughlin: What happens in the generality of cases is that there is an agreed figure, say £10. If I want, as an individual in any industry, to spend more than the £10, then the hon. Gentleman can bet his bottom dollar that the local insurance officer will not agree to my spending that amount.

Mr. Jenkin: If the hon. Gentleman could show that he was required to spend this to perform the duties of his office, then the tax inspector would allow the higher sum. If it is merely a matter of personal choice by the individual, then I fully concede that that does not alter the tax rule. It is a question of whether the expenditure is wholly, exclusively and necessarily incurred in the performance of the duties of office. To revert to the white leggings and oilskins to which the hon. Gentleman referred when talking of his previous incarnation in the fishing industry, if he could show that because of the particular work in which he was engaged he needed to have more than the figure that had been negotiated by his union, then it would be open to him to persuade his inspector to accept that and, if it was not accepted, to appeal to the Commissioners. The flat deduction system, bearing in mind that it is a minimum figure and that people can apply for a higher sum, is the first reason why I say the rule is working satisfactorily.
Secondly, we must take into account what is now Section 192 of the Taxes Act, formerly Section 16 of the Finance Act, 1958. Under that Section, following the recommendations of the Royal Commission—not exactly, but in spirit—Parliament decided that annual subscriptions and fees to professional bodies and learned societies should be allowed if they are connected with the taxpayer's employment. It has been generally recognised that the Section went a long way to meeting the point raised by the Royal Commission, particularly about professional people in employment.
It often covers the professional journal which will be included within the annual subscriptions, and in other cases additonal subscriptions are admissible for periodicals which are devoted wholly or mainly to the society's principal purpose. Here again the Revenue has approved lists of professional societies and learned bodies for which the subscriptions are admissible provided that the employee is engaged in that particular area of activity.
It is for these reasons that I say that the existing rule works satisfactorily. I have made the point that the employer normally provides the facilities to enable the employee to do his job and reimburses any expenses. I have given an example of the teacher in class who is usually provided with all the necessary books for teaching the class. In practice such teachers as, for instance, university lecturers and sixth form teachers are allowed to deduct the expenses of books which they buy for use in class.
8.45 p.m.
The hon. Member for West Lothian suggested that we should go further. He suggested there should be a tax allowance to encourage, as he put it, the book-owning habit, to help teachers to acquire background libraries to improve their knowledge of and skill in those subjects in which they are particularly interested, to enable them to keep up to date with their subjects. Naturally, it is desirable that a teacher or other professional person should acquire a library—I do not think I need any prompting by my hon. Friend the Chief Secretary to say that—but the question is whether this expenditure is, in fact, incurred in the performance of the duties of the office and the problem is where we draw the line. For instance, how do we distinguish between expenditure incurred to keep up to date in filling the existing office, and expenditure perhaps to enable a teacher to achieve promotion to a different office, or to take a different job? Perhaps there would be a relatively small amount for buying books, but what about a classics teacher who feels it is part of his duty to explore Greek and Roman antiquities? It seems to me that one is opening the gates extremely wide.
The truth is that it is necessary to limit the Schedule E expenses rule to the expenditure incurred in the performance of the duties and to exclude expenditure of a personal nature whose only possible basis for a claim is that it is in some way related to the man's job. I recognise that the Clause will limit the expenditure to the five categories the hon. Member mentioned and to a figure of up to £50, but—

Mr. Sheldon: I thought the hon. Gentleman would need to deal, as it is essential that he should, with the question

of increases in relief needed because of the incidence of inflation. He seems to be coming to the end of his speech without having referred to it. What really is important is that the figure needs to change. The hon. Gentleman gave a number of figures as applied to different occupations. They show how relief needs to be increased as inflation goes on. Surely this is a most important matter But he has not yet mentioned it.

Mr. Jenkin: I think it was before the hon. Gentleman came in that I was engaged with the hon. Gentleman the Member for Gloucestershire, West—I will not say in an altercation, for I would not wish to have one with the hon. Gentleman—in a discussion as to the relevance of the particular figures in particular occupations. I made it clear that it is always open to a union or professional association to approach the Inland Revenue to satisfy the Revenue that a figure which may have existed for a number of years is no longer representative of the expenditure which the members of the union or professional association have to incur in earning the emoluments of their offices. I also made the point that there are a very large number of these figures which have been agreed and I had the assistance of the hon. Member, whose speech in the 1966 debate I referred to briefly. The hon. Member will forgive me if I do not tread that ground again. The difficulty is that if we were to concede the principle embodied in this new Clause it would be increasingly difficult to resist its application to further items of expenditure. It would lead to the erosion of the tax base, and it would seem to me that, in these circumstances, it would be a very slippery path indeed.
My third reason—I do not place as much weight on this as on the other two reasons, which are issues of principle—is a practical consideration to which the hon. Member for Haywood and Royton referred. It is not possible to estimate the cost of the new Clause except to say that it would undoubtedly be considerable. My predecessor, Mr. MacDermot, in reply to the debate in 1966, indicated that, and that, even on the basis of £25, the cost would be as much as £100 million, although he indicated that that included quite a lot of expenditure which was already allowed.


As regards the cost, one is talking certainly in terms of tens of millions. More important, however, particularly in present circumstances, would be the manpower requirements in the Inland Revenue if we were to concede the case.
I appreciate that the hon. Member sought to overcome that by arguing that trade unions could negotiate lump sum figures for individuals on the new, more relaxed basis. Even so, this would be bound to have considerable staff implications, and the fact that it was negotiated on a lump sum basis would be bound to increase the cost more than if it were done on an individual basis.

Mr. Dalyell: We have seen many other slippery paths in this year's Budget and Finance Bill than granting these allowances. Could the hon. Gentleman disentangle the cost of a book allowance for teachers from the overall figure of tens of millions which he has given?

Mr. Jonkin: Not without notice. I would not, however, encourage the hon. Member to believe that it could possibly be right to make a specific exception in respect of teachers' books and to refuse, for instance, in respect of examination fees for accountant's articled clerks. It would seem to me that one would be drawing demarcation lines that would be totally impossible to defend. I would not be tempted to go down that slippery slope. As I emphasise again, however, it goes without saying that everybody wishes to encourage people to acquire libraries and to undertake courses of study, but it does not necessarily follow that there should be a tax relief for engaging in those desirable activities.
I therefore sum up by saying that I believe the existing law and practice meets the reasonable requirements of the overwhelming majority of Schedule E taxpayers. If further expense is incurred, it is, in general, a matter of personal choice. The taxpayer is not obliged to incur the expenditure, and he certainly does not do so in the course of performing the duties of the employment. It is not necessary to earn the income. In those circumstances, it seems to me that a case for further relief has not been made.

Mr. J. T. Price: The Financial Secretary to the Treasury has made a valiant

attempt to defend his wicket on the new Clause. It is the classical function of a Financial Secretary on the Treasury Bench to defend his wicket, and I do not criticise him for doing so in such an agreeable way. The hon. Gentleman has tried to give us a rational, reasonable, pleasant justification for something which is not quite as simple as he would have us believe.
As the hon. Gentleman knows full well from many previous debates in the House, it is quite useless for him or any other Treasury Minister to point out to me that this kind of proposal has been resisted by both Labour and Conservative Governments for many years. That does not shake me at all, because I admit at once that some of my hon. Friends who have occupied office in the Treasury in former Administrations have been equally obtuse with their colleagues when they occupied the corridors of power.
Without wishing to be tendentious, which is the last thing I would try to be in the House of Commons, let me leave the books alone for the moment, although I will say a word about them presently. I am very interested in them because long before I reached the age of 21 I had acquired 1,000 books of my own out of my very meagre pocket money. They have always been one of my greatest treasures.
Let us take the question of protective clothing and the provision of tools. It is fashionable for Treasury Ministers in the House of Commons, when faced with this kind of request from back-benchers and others who are interested, to say that the question of protective clothing is dealt with fairly and in a liberal manner by many employers—and that is true. There was a time when it was almost unknown for companies or employers of any size to provide overalls, leggings or protective clothing of any kind. Going back a bit further, within my own lifetime, it was quite unknown for employers to produce the tools of the trade.

Mr. James Dempsey: They still do not.

Mr. Price: They still do not. The first thing an engineer does when he comes out of his time at 21 is to buy himself a box of tools if he has not inherited one from his father. He has had no allowance for this from the Treasury but, being a


good craftsman and not blaming the tools for bad workmanship, he has bought the tools out of his own resources. A man used to have to pay for the sharpening of his picks, for his miner's lamp and the little bit of oil that went into the lamp—the lamp money of 6d. a week. This was the common historic procedure of British industry.
In more recent years, there has been a liberalisation and greater co-operation from employers with more enlightened ideas, chiefly under pressure from trade unions and stupid Socialists like me and some of my lion. Friends—

Mr. Sheldon: My hon. Friend is making excellent points, but is he not understating his case? Although employers nowadays are more enlightened about the provision of tools, nothing can replace the possession by an individual of tools he knows well and can depend on. If he gets tools from the store they may be of doubtful quality because they have been used by everybody else, or they may need to be calibrated, which is the case with engineers' tools. No engineer calls himself a skilled craftsman unless he posseses his own tools. He takes a pride in them and cherishes them all his life. I still have mine.

Mr. Price: I am grateful for that intervention, which has given me a rest just for a moment. It tempts me to go into another aspect which I had thought to spare the House the torment of. I thought we all wanted to go home sometime. This is a fascinating theme and I come back to a perfectly serious point. I do not want to treat this matter flippantly, although I tend to be light-hearted about these things.
The practice of Treasury Ministers is all too aften to quote the big, progressive employer and to forget the large number of bad employers who do not even provide protective clothing, and who do none of the things that are common practice in the great corporations which are so often cited as examples of liberal practice. I will tell the House the difference in practice between good companies and bad companies.
A good company will provide overalls and protective clothing where dirty work is to be done, and will provide for the laundering of them at no cost to the workmen. When Schedule D has to be computed

through the company's accountants—I am looking at one or two accountants on my own Front Bench who have done this job for many years—an ample allowance is given for what is spent. No arbitrary ceiling is fixed by agreement for such employees as are on the company's payroll to lessen the liability for tax in respect of those payments. This is well understood.
Another employee doing the same job for another employer may not have the advantage of an agreement for the provision of free protective clothing, and he is faced with an arbitrary limit of perhaps £8 or £7, or a minimal amount that makes no reference to inflated values. The onus is on the workman to establish his case without any professional assistance.

9.0 p.m.

Mr. Patrick Jenkin: I thought for a moment that the hon. Member was leaving out of account the fact that this is not, as he put it, a ceiling but, in a sense, a floor. It has always been open to the man to establish that he has spent, more in doing those things covered by the agreement, and professional advice does not seems to be needed there at all. Receipts would be all that were necessary, or even a supported statement of some sort. The matter is not as difficult as the hon. Gentleman seeks to make out.

Mr. Price: I am being sorely tempted. The last thing I want is to be involved in an altercation with the Financial Secretary, but he is being a little narrow on this question. The man in the small firm who has no professional assistance is in a different category in regard to tax relief for his purchases of protective clothing from that of his opposite number working for a large employer, who is not at such a disadvantage. I do not wish to press the point further except to say that if the Clause merely gets the matter debated until one day some Government have the sense to see that the practice in this case is not as equitable as we are sometimes told it is, it will be all for the good.
I was naturally attracted by what was said earlier about books. The idea of putting a tax on books or putting any penalty on their circulation is completely obnoxious to me. It is just as senseless as was the old window tax. As a boy in Lancashire I saw large blocks of factories and offices and other premises with


the windows bricked up because some stupid Tory Government about a century earlier—or it may have been a Liberal Government—put a tax on windows. Whatever the political persuasion, it was a very silly Government. Bricked-up windows were quite common in those days. It had been considered bad to have too much light shed on the work going on in a building, so a tax was put on windows. The occupants responded by getting bricklayers to brick up the windows. In Lancashire, there are still thousands of windows bricked up in very old buildings which stand as a memorial to the industrial age on which our greatness was founded.
A tax on books is equally stupid. Any Government, Labour or Tory, who tax the circulation of literature are stupid. So long as we have this stupid idea that we can put a tax on the circulation of knowledge, we are not as enlightened as we once were. And if we are to replace purchase tax by a value-added tax on the massive scale expected by some Common Marketeers I will have more to say here than I would otherwise have said.

Mr. Barnett: With the leave of the House. I thought it odd that we should have had a debate without mention of the Common Market. My hon. Friend the Member for Westhoughton (Mr. J. T. Price) has relieved our minds on that score.
When talking of some of the reliefs which should be available, I was reminded by my right hon. Friend the Member for Birkenhead (Mr. Dell), who has some knowledge of history, that in the Elizabethan army soldiers had to pay for their own ammunition and did not get any tax allowance.
The Financial Secretary put forward a most inadequate and somewhat complacent reply on the way that the system now works. He referred, in an intervention in the excellent speech of my hon. Friend the Member for Westhoughton, to the fact that the present system is not imposing a ceiling, but a flood. He is right about that. Most ordinary taxpayers under P.A.Y.E. have a floor. They have either nil or something above it, so they start from nil. In that sense we have a floor.
We have had an interesting debate. The hon. Member for Surrey, East (Mr.

William Clark), in reply to the point I made earlier about this not being a balanced Finance Bill, said that it was balanced because the S.E.T. reduction went right through. My hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) had something to say about that. I am sure that others of my hon. Friends would have had something to say, too, if they had been told that S.E.T. goes right through. I am not too sure who gets hold of it as it is passing through, but certainly not the people we are trying to assist with the new Clause.
The points raised by my hon. Friend the Member for West Lothian (Mr. Dalyell) about an allowance for young teachers and the incentive effect of allowing such a Clause to the encouragement of the book-owning habit were in no way adequately dealt with by the Financial Secretary. The hon. Gentleman made one fundamental point which, as I hope to show, he answered himself. His main point was that for the Schedule D taxpayer, where the rule is that the expense has to be wholly and exclusively incurred, the expense does not have to be necessarily incurred. He said that only the Schedule D taxpayer can be the arbiter whether the expense is appropriate and that all that the inspector of taxes can do is to decide whether that expense is wholly and exclusively incurred.
The hon. Gentleman went on to draw a comparison with the Schedule E taxpayer. He argued that in that case it was for the employer to decide whether the expense should be allowable. In effect, he said that if the employer does not consider that the employee should have additional overalls, tools, books, and so on, it should not be an allowable expense to tax. That was the main burden of his argument. I am paraphrasing it. If I have got it wrong, perhaps he will put me right.

Mr. Patrick Jenkin: It is not a question of "should not be an allowable expense". What I intended to argue was that prima facie, in the great generality of cases, the employer will provide the employee with the necessary facilities to undertake the duties of his employment, but that, if he does not, the rule—I submit that it is a reasonable rule—requires that it is only if the employee is required to incur the extra expense for


the purpose of performing his duties that he should be entitled to tax allowance.

Mr. Barnett: That is not so different from what I was saying. The hon. Gentleman was arguing that if the employer does not provide the tools or overalls and the employee supplies them for himself, that would be a test whether that expense should be allowable. I gather the hon. Gentleman does not dispute that that is what I was saying.
As has been said by many of my hon. Friends, there are many good employers who provide more than an adequate supply of overalls, tools, and so on; but, there is a large number who certainly do not supply an adequate amount of tools, overalls, and so on. For example, many women workers have to launder their own overalls every week. The good employers would meet that expense, but many others would not.
The main burden of the hon. Gentleman's argument was that if the employer is not prepared to meet this expense, in itself this is an adequate test as to whether the expense should be allowable. He then virtually answered the main burden of his case, because he referred to a series of questions that I put to him a little while ago, when I asked how many agreements there were where there was an allowance for tools, overalls and the like. After giving a few examples of agreements between trade unions, employers and the Inland Revenue, again he said that there are so many hundreds of agreements between trade unions and the Inland Revenue that it is almost impossible to list them all.
In other words, the Revenue is at present allowing, on a very large scale, expenses incurred by employees where the employers do not meet them. Therefore, the whole burden of the hon. Gentleman's point is broken. In all those cases, the expenses allowed by the Inland Revenue—it may well be that the Revenue do so virtually in contravention of Section 189 of the Income and Corporation Taxes Act—are very flexible; flexible in such a way that it completely invalidates the hon. Gentleman's argument.
The hon. Gentleman said that he has no desire to restrict these expenses. If he genuinely has no desire to restrict them, one can only assume that by impli

cation. Indeed, when he intervened during the speech of one of my hon. Friends, he seemed to imply that the Revenue should be prepared to review upwards the many agreements which exist.
As my hon. Friend the Member for Gloucestershire, West pointed out, in one industry, with an allowance of £10 per employee, the Revenue would be prepared to consider revising that upwards. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) pointed out that inflation has meant that there should be an increase in the amount of the allowances. In Committee the Financial Secretary pretty well conceded that there is a case for an increase in some allowances because of inflation. We debated the increase in the car allowance from £2,000 to £4,000. The Financial Secretary said that the Government had included a little bit for inflation. That little bit turned out to be about 43 per cent. I suppose that that was a little licence, bearing in mind what the Government are likely to do in the next year or so. In many cases the last time that these agreements were negotiated was some time ago. Therefore, in view of what the hon. Gentleman has said, I assume that trade unions should now seek to discuss this matter with the Inland Revenue with a view to revising substantially upwards the figure they have agreed, some years ago in many cases, for tools and overalls.
Apart from that, the general case for giving an additional £50 allowance, especially to those paying tax under P.A.Y.E., was not answered by the Financial Secretary. There is a case for increasing the threshold, by giving an additional £50 allowance, which would remove a number of lower paid taxpayers on Schedule E.
As I pointed out, in the Budget the Chancellor relieved 200,000 taxpayers from paying tax by the child relief, but another 750,000 were brought into the net this year because of inflation. For that reason alone there is a substantial case for giving another £50 allowance under P.A.Y.E. I am not saying that it should be for every person but only where there is an expense of up to £50 for tools, books, overalls, journals, and so on.
In view of the wholly inadequate reply which we have had and the complacency


of the Financial Secretary, I hope that my right hon. and hon. Friends will join me in the Lobby in voting for the new Clause.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 163, Noes 192.

Division No. 408.]
AYES
[9.15 p.m.


Allaun, Frank (Salford, E.)
Hannan, William (G'gow, Maryhill)
Orme, Stanley


Allen, Scholefield
Hardy, Peter
Oswald, Thomas


Archer, Peter (Rowley Regis)
Hart, Rt. Hn. Judith
Paget, R. T.


Ashton, Joe
Hattersley, Roy
Palmer, Arthur


Barnett, Joel
Heffer, Eric S.
Pannell, Rt. Hn. Charles


Bishop, E. S.
Hooson, Emlyn
Pardoe, John


Blenkinsop, Arthur
Horam, John
Parker, John (Dagenham)


Booth, Albert
Houghton, Rt. Hn. Douglas
Parry, Robert (Liverpool, Exchange)


Boyden, James (Bishop Auckland)
Howell, Denis (Small Heath)
Pavitt, Laurie


Bradley, Tom
Huckfield, Leslie
Pendry, Tom


Brown, Hugh D. (G'gow, Provan)
Hughes, Mark (Durham)
Pentland, Norman


Buchan, Norman
Hughes, Robert (Aberdeen, N.)
Price, J. T. (Westhoughton)


Callaghan, Rt. Hn. James
Janner, Greville
Reed, D. (Sedgefield)


Campbell, I. (Dunbartonshire, W.)
Jay, Rt. Hn. Douglas
Roberts, Rt. Hn. Goronwy (Caemarvon)


Carmichael, Neil
Jenkins, Hugh (Putney)
Robertson, John (Paisley)


Clark, David (Colne Valley)
John, Brynmor
Roderick, Caerwyn E.(Br'c'n&R'dnor)


Cocks, Michael (Bristol, S.)
Johnson, Walter (Derby, S.)
Rodgers, William (Stockton-on-Tees)


Coleman, Donald
Jones, Barry (Flint, E.)
Roper, John


Concannon, J. D.
Jones, Dan (Burnley)
Ross, Rt. Hn. William (Kilmarnock)


Cox, Thomas (Wandsworth, C.)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Sandelson, Neville


Cunningham, G. (Islington, S. W.)
Jones, Gwynoro (Carmarthen)
Sheldon, Robert (Ashton-under-Lyne)


Cunningham, Dr. J. A. (Whitehaven)
Judd, Frank
Sillars, James


Dalyell, Tam
Kaufman, Gerald
Silverman, Julius


Davidson, Arthur
Kerr, Russell
Skinner, Dennis


Davies, Denzil (Llanelly)
Lambie, David
Small, William


Davis, Terry (Bromsgrove)
Latham, Arthur
Smith, John (Lanarkshire, N.)


Deakins, Eric
Lawson, George
Spearing, Nigel


Delargy, H. J.
Lee, Rt. Hn. Frederick
Spriggs, Leslie


Dell, Rt. Hn. Edmund
Leonard, Dick
Stoddart, David (Swindon)


Dempsey, James
Lewis, Arthur (W. Ham, N.)
Strang, Gavin


Doig, Peter
Loughlin, Charles
Summerskill, Hn. Dr. Shirley


Dormand, J. D.
Lyon, Alexander W. (York)
Swain, Thomas


Douglas, Dick (Stirlingshire, E.)
Lyons, Edward (Bradford, E.)
Taverne, Dick


Douglas-Mann, Bruce
Mabon, Dr. J. Dickson
Thomas, Jeffrey (Abertillery)


Driberg, Tom
McBride, Neil
Thomson, Rt. Hn. G. (Dundee, E.)


Eadie, Alex
Mackenzie, Gregor
Thorpe, Rt. Hn. Jeremy


Edwards, Robert (Bilston)
Mackie, John
Tinn, James


Ellis, Tom
Mallalieu, J. P. W. (Huddersfield, E.)
Torney, Tom


Evans, Fred
Marks, Kenneth
Tuck, Raphael


Femyhough, Rt. Hn. E.
Marquand, David
Walden, Brian (B'm'ham, All Saints)


Fisher, Mrs. Doris (B'ham, Lady wood)
Marshall, Dr. Edmund
Wallace, George


Fletcher, Ted (Darlington)
Mayhew, Christopher
Watkins, David


Foley, Maurice
Meacher, Michael
Weitzman, David


Ford, Ben
Mellish, Rt. Hn. Robert
Wellbeloved, James


Freeson, Reginald
Mcndelson, John
Wells, William (Walsall, N.)


Galpern, Sir Myer
Mikardo, Ian
White, James (Glasgow, Pollok)


Garrett, W. E.
Millan, Bruce
Whitehad, Phillip


Gilbert, Dr. John
Miller, Dr. M. S.
Whitlock, William


Ginsburg, David
Morgan, Elystan (Cardiganshire)
Williams, Alan (Swansea, W.)


Golding, John
Morris, Alfred (Wythenshawe)
Wilson, Rt. Hn. Harold (Huyton)


Gourlay, Harry
Morris, Charles R. (Openshaw)
Woof, Robert


Grant, George (Morpeth)
Morris, Rt. Hn. John (Aberavon)



Grant, John D. (Islington, E.)
Murray, Ronald King
TELLERS FOR THE AYES:


Hamilton, James (Bothwell)
Ogden, Eric
Mr. Ernest Armstrong and


Hamilton, William (Fife, W.)
O'Halloran, Michael
Mr. James A. Dunn.


Hamling, William
O'Malley, Brian





NOES


Adley, Robert
Boardman, Tom (Leicester, S. W.)
Chapman, Sydney


Alison, Michael (Barkston Ash)
Boscawen, Robert
Chataway, Rt. Hn. Christopher


Allason, James (Hemel Hempstead)
Bossom, Sir Clive
Chichester-Clark, R.


Atkins, Humphrey
Bowden, Andrew
Churchill, W. S.


Baker, Kenneth (St. Marylebone)
Boyd-Carpenter, Rt. Hn. John
Clark, William (Surrey, E.)


Baker, W. H. K. (Banff)
Bray, Ronald
Clarke, Kenneth (Rusholiffe)


Barber, Rt. Hn. Anthony
Brinton, Sir Tatton
Clegg, Walter


Batsford, Brian
Brocklebank-Fowler, Christopher
Cooke, Robert


Bell, Ronald
Brown, Sir Edward (Bath)
Cooper, A. E.


Benyon, W.
Bryan, Paul
Corfield, Rt. Hn. Frederick


Berry, Hn. Anthony
Buchanan-Smith, Alick (Angus, N&M)
Cormack, Patrick


Biffen, John
Buck, Anthony
Critchley, Julian


Biggs-Davison, John
Butler, Adam (Bosworth)
Crouch, David


Blaker, Peter
Carlisle, Mark
Crowder, F. P.




Curran, Charles
King, Evelyn (Dorset, S.)
Rees-Davies, W. R.


d'Avigdor-Goldsmid, Sir Henry
King, Tom (Bridgwater)
Renton, Rt. Hn. Sir David


d'Avigdor-Goldsmid, Maj-Gen. James
Kinsey, J. R.
Rippon, Rt. Hn. Geoffrey


Dean, Paul
Kitson, Timothy
Rost, Peter


Deedes, Rt. Hn. W. F.
Knight, Mrs. Jill
Russell, Sir Ronald


Dixon, Piers
Knox, David
Scott, Nicholas


Dodds-Parker, Douglas
Langford-Holt, Sir John
Scott-Hopkins, James


Drayson, G. B.
Le Marchant, Spencer
Sharples, Richard


Dykes, Hugh
Lewis, Kenneth (Rutland)
Shaw, Michael (Sc'b'gh & Whitby)


Edwards, Nicholas (Pembroke)
Longden, Gilbert
Shelton, William (Clapham)


Farr, John
Loveridge, John
Simeons, Charles


Fell, Anthony
Luce, R. N.
Sinclair, Sir George


Fenner, Mrs. Peggy
McAdden, Sir Stephen
Smith, Dudley (W'vvick & L'mington)


Fletcher-Cooke, Charles
McCrindle, R. A.
Soref, Harold


Fookes, Miss Janet
McLaren, Martin
Speed, Keith


Fortescue, Tim
Macmillan, Maurice (Famham)
Spence, John


Foster, Sir John
McNair-Wifson, Michael
Sproat, Iain


Fowler, Norman
Maddan, Martin
Stainton, Keith


Gardner, Edward
Madel, David
Stanbrook, Ivor


Gibson-Watt, David
Marten, Neil
Stewart-Smith, D. G. (Belper)


Goodhart, Philip
Mather, Carol
Stokes, John


Goodhew, Victor
Maude, Angus
Stuttaford, Dr. Tom


Gorst, John
Meyer, Sir Anthony
Tapsell, Peter


Gower, Raymond
Mills, Peter (Torrington)
Taylor, Sir Charles (Eastbourne)


Grant, Anthony (Harrow, C.)
Mitchell, Lt.-Col. C.(Aberdeenshire, W)
Taylor, Edward M.(G'gow, Cathcart)


Gray, Hamish
Moate, Roger
Taylor, Frank (Moss Side)


Green, Alan
Monro, Hector
Tebbit, Norman


Gummer, Selwyn
Montgomery, Fergus
Temple, John M.


Hall, Miss Joan (Keigbley)
More, Jasper
Thatcher, Rt. Hn. Mrs. Margaret


Hall, John (Wycombe)
Morgan-Giles, Rear-Adm.
Thomas, John Stradling (Monmouth)


Hall-Davis, A. G. F.
Morrison, Charles (Devizes)
Trafford, Dr. Anthony


Harrison, Col. Sir Harwood (Eye)
Mudd, David
Trew, Peter


Hay, John
Murton, Oscar
Tugendhat Christopher


Hayhoe, Barney
Neave, Airey
Turton Rt Hn. Sir Robin


Heath, Rt. Hn. Edward
Noble, Rt. Hn. Michael



Hicks, Robert
Normanton, Tom
Waddington, David


Higgins, Terence L.
Onslow, Cranley
Walder, David (Clitheroe)


Hiley, Joseph
Oppenheim, Mrs. Sally
Walker-Smith, Rt. Hn. Sir Derek


Hill, James (Southampton, Test)
Owen, Idris (Stockport, N.)
Walters, Dennis


Holt, Miss Mary
Page, Graham (Crosby)
Ward, Dame Irene


Hordern, Peter
Parkinson, Cecil (Enfield, W.)
Warren, Kenneth


Hornby, Richard
Peel, John
Weatherill, Bernard


Hornsby-Smith. Rt. Hn. Dame Patricia
Percival, Ian
Wiggin, Jerry


Howell, David (Guildford)
Pink, R. Bonner
Wilkinson, John


Howell, Ralph (Norfolk, N.)
Powell, Rt. Hn. J. Enoch
Wolrige-Gordon, Patrick


Hunt, John
Pym, Rt. Hn. Francis
Wood, Rt. Hn. Richard


Hutchison, Michael Clark
Raison, Timothy
Woodhouse, Hn. Christopher


Irvine, Bryant Godman (Rye)
Rawlinson, Rt. Hn. Sir Peter
Wylie, Rt. Hn. N. R.


Jenkin, Patrick (Woodford)
Redmond, Robert



Jessel, Toby
Reed, Laurance (Bolton, E.)
TELLERS FOR THE NOES:


Kellett-Bowman, Mrs. Elaine
Rees, Peter (Dover)
Mr. Hugh Rossi and


Kilfedder, James

Mr. Paul Hawkins.

New Clause 10

ALTERATION TO GENERAL BETTING DUTY

As from 2nd August 1971

(1) the rate of duty on any on-course bet made on or after that date shall (in lieu of the rate of 5 per cent. specified in section 1 (1)(a) of the Finance Act 1970) be 2½ per cent.;
(2) any bet made on or after that date by means of a totalisator situated on premises forming part of the track shall be deemed to be an 'on-course' bet.—[Mr. Temple.]

Brought up, and read the First time.

Mr. John M. Temple: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker (Miss Harvie Anderson): It would be for the convenience of the House to discuss at the same time new Clause 8–Alteration to

general betting duty in respect of on-course bets—
In relation to any on-course bet made on or after 2nd August 1971 section 1 of the Finance Act 1970 (which relates to general betting duty) shall be read and have effect as if, in place of the words '5 per cent.' there were substituted the words '2½ per cent.'.
and new Clause 37–On-course betting—
As from 1st November 1971 the provision contained in section 1(1)(a) of the Finance Act 1970 shall be abolished, and the provision contained in section 1(3) of the said Act (defining an 'on-course bet') shall be amended by the addition of these words at the end of the subsection 'or the bet is made by a person on behalf of the Horserace Totalisator Board on premises not forming part of the track but in such event the bet made is transmitted to the premises forming part of the track and forms part of the pool on the course for the event in respect of which the bet is made.

Mr. Temple: I am delighted that you have selected new Clauses 8 and 37 to be debated at the same time, Mr. Deputy


Speaker. I cannot claim to be a novice at the question of betting legislation, and I can claim the honour of being relatively consistent in these matters in that I have proposed several new Clauses and Amendments directed to the same end.
The object and principles underlying new Clause 10 are. basically, to reduce by half—that is, to 2½ per cent.—the duty on all betting on racecourses and at the same time to provide that all bets struck on the totalisator shall be deemed to be on-course bets
I am not wholly convinced that new Clause 10 is properly drafted, but I am more confident about the drafting of new Clause 8, having been more associated personally over a period of years with the approach enshrined in the latter. A new Clause on similar lines was proposed by the Conservative Opposition in both 1968 and 1969.
New Clause 37 is in the name of my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies), who has been so dedicated to the cause of racing. I well remember how in 1966 he returned at a gallop on Gold Cup Day from Ascot in order to propose a new Clause designed to the same end. I am happy to say that I have not had to drag myself from Chester races on this occasion. These new Clauses are being debated at what I call a reasonably quiet time in the racing calendar, between Ascot and Goodwood, and we have time for a good review of the situation. In my view, the present situation is not healthy for racing generally or for the bloodstock industry.
New Clause 10 has, as I say, two objectives, the second being to help the totalisator. I cannot claim to be an expert on the totalisator or its workings, but I know that it is in considerable difficulty at present. It has not been able to meet the contributions which it should have been making to the levy board in the last two years, and on present form there is little prospect that it will pay the levy in the foreseeable future.
My hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) has had a good deal to do with the totalisator—

Mr. Stephen Hastings: Not successfully.

Mr. Temple: —and, if he can catch your eye, Mr. Deputy Speaker, he will, I am sure, deploy the case for the totalisator much better than I could. For my part, as I say, I have always endeavoured to be consistent in politics, and in no sphere, I believe, can I claim to have been more consistent than in the sphere of betting legislation.
It is a great tragedy that the House lost a most respected Member by the death of Iain Macleod. I well remember the occasion when he moved an Amendment on this subject to the Finance Bill in Committee in May, 1968. I hesitate to mention this now in the presence of the Minister of State, but that Amendment was supported not only by the present Financial Secretary and the present Minister of State at the Treasury but by five Members who are now Ministers in the present Government and by two who are Government Whips. I was myself associated with the Amendment, so I cannot think it was other than highly respectable.
It is, perhaps, good fortune that the present Chief Secretary to the Treasury is to answer this debate. He was not personally involved on that occasion, and I suspect that he has been picked because he is the one Treasury Minister not to have been involved in previous debates and who did not vote for the Amendment on the lines of new Clause 8 to which I have referred. I hope that he has at any rate read the OFFICIAL REPORT of the debates. I cannot do better than quote the late Iain Macleod, who said in the debate in 1969:
… I think that there ought to be a clear differential between the tax on on-course betting and the tax on off-course betting ".
Then he said something which is very significant:
I hope in a not-too-distant Budget that will come about."—[OFFICIAL REPORT, 16th July, 1969; Vol. 787, c. 679.]
Perhaps there is a hope on this occasion.
9.30 p.m.
I do not think that the Treasury would be losers if it took the action which I advocate. In 1970 hedging betting on-course was exempted from tax. That shows how persistency can have effect, for that was a matter I had pursued for a number of years. Moreover, the principle which I and a number of my right hon. and hon. Friends had enunciated, of


a differential between on-course and off-course betting, was accepted for the first time, so there is no difficulty for my hon. Friend the Chief Secretary today. He will not have to say that he would be breaching a Treasury principle, for it has already been breached by the previous Government. I am trying to induce him to jump a little further through the hole already made in the Treasury defences to bring about the happier state of affairs in which on-course betting would be treated much more lightly than it is now from a tax point of view.
Today there is a 6 per cent. duty on all bets struck off-course and a 5 per cent. duty on all bets struck on-course. I do not think that that difference of 1 per cent. is the difference to which Iain Macleod was referring. He was referring to a substantial difference, such as halving of the on-course duty.
I should like to explain something of the figures, for the House is entitled to know whether I am seeking a remission of tens or hundreds of millions of £s of revenue or a mere £1 million or so. In 1970–71 the on-course turnover in both horse racing and dog racing was about £100 million, bringing in duty of £5 million. The off-course figure was gigantic. The turnover was £1,000 million, and the duty it brought in was about £61 million.
I would encourage my hon. Friend by admitting that the hedging concessions granted last year has stimulated the on-course market to an extent. That is all to the good. But it is encouraging also from the Treasury point of view to realise that that concession did not diminish the revenue. That will substantiate the point I shall make later that the tax could well be reduced without reducing the revenue.
A most serious matter has been the drop in race-course attendances. A very large number of people are now watching horse races on television. From about 27 racing programmes on television in a year, the figure has grown in the past few years to about 235. But on the racecourse the number of persons watching the racing has dropped by a third since 1953, from 6 million—a small enough figure—to only 4 million a year. The daily attendances on the track have fallen from an average of 8,500 to 5,000. We should expect to see more people at an average Third Division football match than at the average race meeting. These

figures include the great meetings of Ascot, Goodwood, Aintree and everywhere else. One can deduce from them the fact that attendances at some of the small meetings are amazingly thin.
Linked to the question of the small attendances is the viability of the racecourses themselves. A few years ago, in the period 1963–66, there was an average return on capital invested in racecourses of about 6 per cent. That was a modest reutrn in itself. Between 1967 and 1969 the return on capital dropped to 0·3 per cent.; in other words, one-third of one per cent. is the return on capital invested in racecourse. That is a most dangerous situation. If we want the bloodstock industry to prosper, we must have racecourses that can attract the public and give prize money. There is real danger of these courses being taken out of racing altogether for development for other purposes because the capital employed is not making a reasonable return.
I have no wish to labour this point. The arguments are well known. They have been well put in previous debates. Recently Lord Wigg said that the racecourse market is the pyramid upon which the whole of the racing industry depends—on which off-course betting depends. At Chester races a few years ago, just before I spoke on this matter, I met those two mythical men, the representatives of the Sporting Life and the Sporting Chronicle who determine what is called the "starting price return". Many people imagine that bookmakers make the starting price return; the starting price is made not by them but by these two authoritative racing correspondents, who have the difficult job of assessing what the market is at the off. That market price at the off is the starting price which determines all the off-course betting throughout the country.
The one thing I and my hon. Friends have always been concerned about is that we should have a strong market on-course. Mr. Sidney Bates, a respected racehorse owner, told me that the market was so weak at a meeting recently that no starting price could be made. That is one end of the scale. If a weak market develops at a very small meeting it is not difficult to influence the starting price odds by placing a few bets strategically in the market. This is why a strong market on-course is desirable.
I hope that the Government will look favourably at the new Clause. The principle was supported in Opposition by the Conservatives, and indeed, received all-party support at that time. I do not believe that much revenue would be lost. If the betting duty on-course was halved, as things stand the loss to the Revenue would be about £2½ million, but I believe that there would be a big upsurge in betting on the course and that the Revenue would, therefore, soon gain back a great deal of what the Treasury thinks it might lose by this proposal, and, over and above that, would gain tremendously by the added encouragement this would give both to racecourses themselves and to the whole of the bloodstock industry. For these reasons, I hope that the Government will look favourably at the new Clause.

Mr. W. R. Rees-Davies: The subject which we are discussing tonight is probably almost as popular among the public as the subject of the Common Market is in certain quarters. I make no apology for following my hon. Friend the Member for the City of Chester (Mr. Temple) in developing some of the arguments on a matter which affects millions of people who are fascinated by the sport of kings.
There are four factors which arise, the first of them new. The new factor is that the Horse Race Totalisator Board is heading straight for bankruptcy. It behoves the House and the Treasury to take action either to save it, or to decide that it shall not continue.
The second factor, of overriding importance, is to do something to encouraging people to go racing on course and not to sit watching the television. The third, which is vital, is to try to restore to racing the quality of racing which is a way of life, a hobby, an interest of so many of us. The fourth is to enable us to maintain this country as the leader of bloodstock and to enable the facilities of the racecourses to provide what they do not now provide—the highest amenities for racing for a country which should continue to give a lead in this rescect. Only one thing can achieve all four factors at the same time: it is to make people who want to watch pay for those

who want to attend and to participate in racing.
The essence of this begins in 1966 with Iain Macleod. It began when he forcefully pointed out to the House that there was all the world of difference between off-course betting and on-course betting, between being a goer and being merely a watcher. He pointed out that there should be a differential between being a participator and being merely an idle watcher, and we voted on it.
In 1968, he followed that by opposing an increase in tax and again he singled out the necessity for a distinction between the off-course and the on-course market, having explained the essentials of the market in 1966. Finally, in the quotation which has been given, he said in terms that it was the policy of the Conservative Party, which would be pursued in a not-too-distant future Budget, to introduce a substantial differential between on- and off-course betting.
Why is this so? First, one must look at the general betting duty picture. There are 64 racecourses racing on approximately 800 days with 5,000 races. In the financial year 1970–71, the immediate up-to-date figures show that the Government are receiving a total £71·149 million. They estimated to receive only £66·5 million, so they received £4·5 million more than they estimated this year. The off-course bookmakers provided £61·45 million; the on-course horse race tote only £1·52 million; the on-course bookmakers £2·77 million; the greyhounds provided on-course for the totalisator £2·95 million and the off-course bookmakers with the dogs £2·44 million. That is the complete picture for 1971. Therefore, the whole tax on course in respect of horseracing is just over £4 million, or less than the difference between the estimated and actual figures received this year by the Revenue, and it represents a tiny fraction of the money received.
9.45 p.m.
When the tax was introduced by mc Treasury in 1966, it thought that it would receive between £11 and £12 million. It received about £13 million. A couple of years later, it estimated that it would receive £30 million. It received £50 million. More recently, it estimated that it would receive £66½ million. It received over £71 million. The off-course punter


has supported betting not racing. But there is no money in racing today, and this is the sad picture. It is entirely the off-course punter, who contributes nothing to the sport except the tax, who has provided the revenue which far exceeded the wildest dreams of any Chancellor of the Exchequer. The turnover producing a mere £10 million on a 2½ per cent. figure in 1966 went up to £55 million in March, 1968. This is the background of the figures against which we must work.
Why is it said that we should either have no tax on course or a negligible tax—say, 1 per cent.? One of the major new reasons is that the tote is heading for, if it has not already reached it, complete insolvency. The facts are these. The debt to the Levy Board as at yesterday's date is £465,606. The loss by the tote last year was £250,000. The tote has no reserves, no capital and virtually no assets. The 1½ per cent. levy fixed by the Home Secretary was to be paid only in the event of its being able to make a profit. It had no chance of doing that. There was a nil return, and next year there will be a nil return. Therefore, one of the purposes for which it was set up, which was to provide a benefit for racing, cannot be achieved.
I do not think that the tote should be blamed for this situation. It is not to blame. Over the past six years the tote contributed no less than £6 million. Now it is unable to do so. Unlike other commercial concerns, it had no capital and no power to obtain a commercial loan. Any profits which it made year by year had to be handed over for the benefit of the concerns it sought to serve. It is in no way to blame in this respect. It may be that there are steps which it can take to improve its profit position. But the situation calls for a keen, hard look because otherwise the Government will be faced with the same position in respect of the tote this coming year as they were faced with in respect of Upper Clyde shipbuilders and other concerns. I do not want that to happen.
The best thing which can be done for the tote is, first, to give it the advantage of not having to pay the tax of £1½ million which it paid last year for on-course betting and, further, to enable it to have off course the advantage of treating as on-course bets placed at tote odds.

For example, if there was a meeting at Chester and a person at Kempton Park wanted to bet at tote prices he could bet at Kempton and the money would go into the pool at Chester.
It is perfectly true that this gives it an advantage to the tote as against the bookmaker. Let me say this with all the authority that I can command—and I have spoken to so many of the bookmakers in the country—that while it is true that they may not like giving an advantage to a competitor in this way, the advantage obtained by accepting the Amendment is one which they will universally accept. They will accept it because of the great advantage which would accrue to racing, and not having to pay the tax on-course would more than offset the advantage which would be carried to the tote, whom naturally they do not regard as the very greatest of competitors, nowadays with their tiny turnover as compared with bookmakers.
A year ago they subscribed to that view virtually unanimously. They have only expressed a different view very recently and it is a view that I have no hesitation in saying would be acceptable provided that we could really secure the benefit for racing which the Amendment would contribute.
There are many ways in which the tote can be assisted. It seems that the first thing to do is to get its tax position right and to ensure that it then is in a position to provide the facilities. The tote has to attend 792 meetings throughout the country and is obliged to provide facilities at all of these whether or not they are profitable. We should take a keen hard look and see whether it ought to continue to do so. There may be opportunities to provide different facilities, such as the tierce for the future which may provide a profit. We need action now or very soon indeed if we are to assist in the maintenance of a system which is of very great value to many small punters and to those who wish to go racing.
Secondly, we must encourage people to go racing. Attendances have been falling year by year. In 1965, five and a quarter million people went racing. By 1969 the figure was 4,110,000. The lack of differential in betting, the cost of going racing, the advent of colour television and the increasing traffic problems are


all factors which have militated against persons going to the course. The necessity for a strong betting market was always in the forefront of the mind of the late Iain Macleod. As a man with a phenomenal knowledge and appreciation of odds and mathematics he recognised a factor which I am sorry to say we will have to train our Front Bench to recognise.
What he understood and what it does not understand at the moment—although many coming up in Customs and Excise are now becoming very well trained in gambling matters—is that we must have a strong betting market because one of the only reasons for sustaining the on-course market today is that the return is made from the course by the journalists whose integrity is undoubted and who return the market price. If there is no effective market on the course there cannot be an effective return and if it is very weak, one bookmaker, by throwing a weight of money in at the last moment, can change the whole range of the odds to his advantage. It is therefore essential that we ensure that people go racing, that they enjoy racing and that they make this a sport which is a living thing.
If that be the third factory, the fourth and most important in many ways is that we maintain the quality of British racing, that we try to retain the best of British bloodstock. Recently, Nijinsky came for sale. This country was unable to find the money. It can find the money, I am happy to say, for a good picture but not for an outstanding racehorse. It was lost to the United States because the National Stud could not find the £2 million for the outstanding horse. It is said, "Oh, but there are many people who are owners today, who have horses." They have horses, poor horses in the main. The quality has fallen badly. If we consider those who owned the best racing stock in our country it was people like Paul Mellon and the late Charles Engelhard. It is the foreign money today.
These are the people who sustain the bloodstock market today. These are the people who are non-United Kingdom taxpayers who are providing the money and who are draining away the bloodstock. Year by year it is being drained away.
Although the Extel Company pays £700,000 a year to the racecourses of

Britain to provide for the blower services, nevertheless this is a pretty poor way of treating our racecourses. They would be very much better supported if we could ensure that people go racing and pay at the gate and go in and provide the funds—which provide the prizes.
Now I come to the shocking figures of prizes. In 1966 the amount was £3 million. In 1970 in flat racing it had risen to only £3·5 million. Although in that period the value in money and returns had gone up by nearly 50 per cent. in actual value they had fallen in this country. In France at the same date they had risen by 30 per cent. and in 1971 alone were up 10 per cent. In Australia, starting from a higher base, the figures were up over 50 per cent. In Greece, where they started racing only two or three years ago, the lowest prize money is £1,000 a race. We are not even as well off as Greece. The net training deficit for owners for last year was £6 million—£1,000 per horse per year. In New South Wales and Victoria, two States in Australia, with a population of 8 million, the prize money exceeds the whole of the prize in the United Kingdom with a population of 55 million.

Mr. William Clark: Disgraceful!

Mr. Rees-Davies: I am delighted that my hon. Friend, with his great knowledge of finance, is understanding these figures so well.
It is perfectly true that a very high price is got for first class yearlings, but the owners who get it—where do they go? Abroad. The money goes to non-United Kingdom taxpayers. So the quality of racing goes down and down.
I would refer to something said in Sporting Life about the tote. There was an article by Michel Rolfe on 1st July and I entirely agreed with a great part of it. He said:
'If the Government cannot solve the tote problem let Lord Wigg run it".
With all respect to his Lordship, I cannot agree with that, but if the Government cannot solve the tote problem through the Home Office let the Home Office transfer it to the Treasury, because this is really a Treasury problem now. It is certainly one which has not been solved by either of the late Home Secretaries, nor is it one which the present Home Secretary has yet done anything to solve.


I think the proper place for it is Customs and Excise. There are the people who are most likely to understand the problems.
In that article it was also said:
A realisation that the Totaliser Board is unlikely ever again to receive money from racing has been apparent to the Levy Board and bookmakers for some time and it is beginning to dawn on everyone else connected with racing. Roy Jenkins, James Callaghan and Reggie Maudling have in turn been the guilty men. Each of them has allowed the Tote position to slip from bad to worse.
I have confidence that this Government, and the Treasury, will now, in the next year, take the action which is necessary to consider the position of the tote, but when they consider the position of the tote, which is there to serve racing, they must also consider the position of the people who participate in racing. There was much criticism of the proposal for a betting tax that bookmakers would be obliged to carry it out effectively. We were told they would evade it They cannot evade it, for the simple reason that if one has a permit and a licence to be a bookmaker, it is too dangerous to evade it.
10.0 p.m.
The bookmakers will ride honestly and properly. Admittedly, it is difficult to remove, perhaps entirely, the tax on course. A nominal one must probably be kept for security reasons, but that is merely to ensure that the Customs and Excise officers who have to administer this, and who have administered it extremely effectively in recent years, must be able to look at the books of the bookmakers on course to see that they are not being fiddled. They must also be able, therefore, to see the whole picture of racing.
I am convinced, therefore, that the only way that we shall succeed in future is to reduce the differential on course to an absolute minimum, just sufficient to provide some type of pitch tax by the bookmakers, to bring in people to enjoy racing so that they can then increase, and increase substantially, the prize money to the levels which one finds in Japan, Germany, France and, possibly, one day, in the United States. This should be done not only for a few selected races, but for racing generally. In this way, the quality of racing could be restored to that of a sport which not

only hon. Members sitting here tonight enjoy, but which the public regard as part of their heritage and want to see restored to the great position that British racing ought to hold if only we in this House will give it our support.

Mr. John Golding: I cannot follow the detailed knowledge of the hon. Member for the Isle of Thanet (Mr. Rees-Davies), but it is important that tonight, when many of us are concerned with the cuts that are to be made in Government grants to small sports, we on this side should emphasise that we are not concerned with granting large subsidies to rich men who want to pursue their hobby.
I speak as someone who has for a long time taken an interest in sport in Chester. One of my earlier sporting recollections is of noting the increased truancy that occurred in Chester schools during the month of May. Many of us were very interested in the racing on the Roodee. It was in Chester, too, that I learned some of the problems and intricacies of the tote, when I worked on the tote during the evenings helping the citizens of Chester to lose a considerable amount of their hard-earned money.
Let us ask ourselves why many of us want the tote. It is because, for many people, it is easier to put a bet on the tote than to put a bet on with a bookmaker. One of the social characteristics of the tote is that, until recently at least, it has enabled working-class people to have a bet without spending too much.
Many hon. Members will know that one of the disadvantages of going racing is that there are six races and it takes a very strong-willed individual not to bet on each race. It takes a man of iron will and great judgment, faced with six races, to decide that he will have a bet on only one, two, three or four of them and leave the others alone. In my youth, the man who could leave a race alone was regarded as a man apart, a cut above the rest of those of us who, being at the races, had to have a bet on each of the six races. Unfortunately, if one has six bets and if one's judgment is like mine, six times 10s. is £3. [HON MEMBERS: "Hear, hear."] In my days on the tote, I discovered that men who were nearly illiterate could tell what the tote odds would be minutes before the machine had


calculated them. So I can tell the House that a person having six 10s. bets will spend £3, and £3 is often too much for a working man to spend at the races. In the old days, when a bet was 2s., one could at a pinch justify spending 12s. Then the ticket went up to 4s. Now we have to pay 30p for a 20p ticket, but still our betting can be restricted to £1·80. It is important that there should be facilities for the placing of small bets on all courses.
I am advised that bookmakers are loth to accept small bets. Bookmakers have lower limits, and people find it hard to make bets of smaller amounts, so we want the tote. We want the tote, too, because some of us, having just escaped from our nonconformist background, cannot quite take the final step of putting the money into the bookmaker's satchel. We have been reared to believe that gambling and bookmakers are both evil. Some of us have escaped from the first proposition and gamble, but still believe bookmakers to be evil. We have been taught that they stand on street corners, or get other people to stand on street corners, to take away our hard-earned money. For some strange sociological reason, we are prepared to give the money to the tote because it does not go into the pocket of the bookmaker. We are loth to make the bookmaking fraternity richer than they are, so we want the tote for this social reason.
The principle of the tote is that ideally it can never lose. It is the same as the principle of the pools. Money is taken in, a certain percentage is deducted and the rest is divided amongst the people who have backed the winners. This principle founders in years when there is bad weather. Kempton Park is not the only course to have suffered from the recent bad winters. The tote obviously has suffered, and this principle breaks down if for extended periods there is no racing so that overheads have to be met when no receipts are coming in. So we must do our best to keep the tote.
I do not want to see the betting tax reduced for either the tote or the bookies. I certainly do not want to see it reduced because it will put more money into the sport because it will save the sport, and because it is for the benefit of livestock and owners. The responsibility rests very

firmly on racing and on racecourse proprietors themselves to make the sport more popular.
What racing is suffering from at present is that in England it has been the sport of kings. It has been an aristocratic sport. The reason for television, and colour television in particular, being at present such a threat to racing is not that it is more comfortable to sit at home and watch the races—although there is something to be said for that on a cold, damp November afternoon—but that for many of us it takes us for the first time off the course, out of the silver ring, into the paddock.
I cannot emphasise that too much when addressing hon. Members opposite. I do not want to introduce the subject of the Common Market tonight, but I confess that the only French I was ever taught was "Gagner ou placé si vous plait"—"Win or place, please". What I learned on visiting France for the first time was the different nature of racing there as a spectator sport, and the different attitude adopted towards the racing public. The cost was much cheaper, and that was to be welcomed. But, most important of all, it struck me that there were not on the racecourse these social divisions. What must strike any social observer of the English racecourse is the social divisions that exist there.
As a child, and I speak very seriously, I was surprised to learn that it was possible to go into a stand, because in my youth most working-class people assumed that they would go on the course and see nothing except the jockeys' caps. That to a very large extent, is true today. If one watches at the Roodee at Chester as one of the "plebs", one sees a colourful scene but relies upon rumour to find out what won—and the Roodee is one of the finest racecourses in the country for viewing [Laughter.] Hon. Gentlemen laugh, but it is true. Unless people who have the welfare of racing at heart recognise these facts, there can be no financial salvation. One can go to the races in this country and see little of the racing. Caps and horses' necks, yes, but races, no.
10.15 p.m.
It goes further than that. Even those who are prepared to spend a little more are divided between those who go into the silver ring and see the races and those who go into a far more expensive


enclosure still and gain admittance to the paddock. Those who go into the silver ring see nothing of the horses before the races; they are cut off. It is only those who can afford what for working class people is a very large amount indeed who can see what television brings. The point I want to rub home is that all are equal watching racing on television. Most, if not all, are equally informed. All can participate. This is not so on the course. Only a small minority are being catered for on courses at present.
The matter goes beyond this fundamental point of being able to watch a sporting event. Our racecourses are often ill-equipped. For example, if one goes to Uttoxeter on a fine summer afternoon to watch the jumping, it can be very difficult to get a cup of tea. It is simpler to get oneself a cup of tea between races whilst watching the I.T.V. seven than at Uttoxeter. Racecourses are difficult of access and often the refreshment facilities, at least for the general public, are extremely poor. I do not suggest that these poor facilities exist for the better off, for those who own, train and even ride the horses. But they must be aware, because their income depends on it, that they will not get large crowds at racecourses unless things are very much improved.
The argument has been that there ought to be some differential between on-course and off-course bookmaking because the industry needs to attract money into itself. The argument is that the off-course punter is putting nothing into the sport. Whether it be little or great, I do not think that the off-course punter should be asked to put anything into the sport. However, there is an argument for the off-course and the on-course punter putting something into the Exchequer.
Whether one gambles with the tote or with the bookies, I think that gambling ought to be taxed. I do not of necessity think that a sport, an entertainment, should be subsidised by the people who bet in this way. I no more think that there should be subsidies from the off-course punter to the racecourses than that there should be subsidies from the pools punter to Tottenham Hotspur, Stoke City or Arsenal. That is not the way in which the sport should be financed. It ought to be made sufficiently attractive

that people would go to the course and pay admission money. Money could then be obtained from the selling of programmes and the profits derived from the sale of refreshments. We should not be running what is predominantly a rich man's sport by taxing people's off-course bets.
On a previous occasion I have crossed swords with my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) and I have had to remind him that it is better for the country's economy that people be kept off the courses midweek. It would be a bad thing for us to discourage the punter to make his bets off the course and encourage him to go racing in the middle of the week.

Mr. Denis Howell: Oh, no; I disagree.

Mr. Golding: I realise that I have to uphold the nonconformist conscience in this debate, surrounded as I am, on both sides of the House, by men who obviously are here to give support to an industry which Lord Wigg has said that he would prefer to see run on its own two legs.

Mr. Laurie Pavitt: Four legs.

Mr. Golding: As far as I am concerned, it is generally two legs.
It is important that the industry should not rely on contributions from betting. There should not be a greater tax burden placed on the man who bets in the betting shop than is placed on the man who bets on the course, because often the difference between them is financial. The man who uses the betting shop often has less money than the man who goes to the course. If one has only 5s. or 10s. in one's pocket one can place a bet in a bookie's shop; but one cannot go to the races with that amount of money. By taxing the man who bets in the betting shop more heavily than the man who goes to the course, we are saying to the man with less money that he has to pay more than his richer brother.

Mr. Howell: May I put two points to my hon. Friend? They have nothing much to do with the nonconformist conscience in his constituency. When I visited his constituency to speak on behalf of my hon. Friend in that well known


by-election, I did not find that conscience to be very pronounced. But I take it from my hon. Friend that it may be.
My first point is that if people wish to bet on horse racing, as most of my hon. Friend's constituents do day by day, and most of my constituents, there can be no sport or interest for them unless the health of the sport as a whole is maintained. That must mean that those who want to enjoy their flutter, as many of us do, have an obligation to make a small contribution towards the health of the sport as a whole.
Secondly, it is of tremendous importance to remember that one can have no sport at all unless one safeguards the atmosphere of the sporting occasion. In racing, unfortunately, one of the things that happen at far too many meetings is that there is a dearth of people on the course and one cannot establish a fair market for the betting and, therefore, a fair market for the punters in my hon. Friend's constituency as well as mine. We cannot do that unless we attract a reasonable number of people on to the course to safeguard the meeting as a sporting occasion in its own right.
For those reasons alone, it has always seemed to me that the case for a differential in betting duty between off-course and on-course betting has been well and truly made.

Mr. Golding: I shall not reply to the second point my hon. Friend has raised. I spoke for 15 minutes in my hon. Friend's absence about the need to attract people to attend races.

Mr. Howell: I was here and I heard that.

Mr. Golding: It is outrageous for an hon. Member to come into the Chamber at the end of another hon. Member's speech and make a point such as the one my hon. Friend made.

Mr. Howell: I am sure that my hon. Friend in his felicitations towards me would not wish to do me an injustice. The fact that I was not sitting on the Front Bench does not mean that I did not hear my hon. Friend's speech. I heard him from the other end of the Chamber. That is why I came on to the Front Bench.

Mr. Golding: Then I withdraw what I said.
The first point my hon. Friend made was a serious one and was that the off-course punter depends on a healthy racing industry. We are living in different worlds. From time to time a horse like Arkle catches the imagination, and the fact that he is in a race will increase the amount of betting. For the most part the off-course bookmaker does not concern himself with whether a given horse can run the distance in one, two, three or four minutes. It is of no concern to the off-course punter whether the horses are of high quality. All that he is concerned with is whether he will pick the best of the bad bunch. He is concerned only with picking winners and not with the health of the industry. When he goes to collect any winnings from the betting shop he is concerned only with the return from his investment and not with the way in which the deductions have been spent.

Major-General Jack d'Avigdor-Goldsmid: It is well known that in Britain there are many people who are extremely interested in racing and derive much pleasure from it. The racing industry employs over 150,000 people. The bloodstock we breed for those who are interested in it is probably the best in the world. We produce jockeys of worldwide prestige. People like Lester Piggott are acclaimed worldwide, which, although this is only in a sporting context, is no bad thing for Britain.
Racing is in a bad way because, as has been said, attendances are falling. This is largely because of the 5 per cent. tax which is levied on on-course betting. The tax was instituted in 1968. The bookmaker deducts 5p in the pound from a winning bet—not only on winnings but on the original stake as well. If the punter loses the bookmaker pays the tax on his losings, but he can adjust that by adjusting the prices. He gives worse odds, especially in place betting, which was formerly at a quarter of the odds and is now at one-fifth.
10.30 p.m.
It is interesting to note that as a result of this the number of bookmakers attending racecourses is steadily falling. In the year ending 31st March, 1968, the average number of bookmakers attending racing per day was 90; then the on-course betting tax went up to 5 per cent., and by the end of this financial year the number had fallen to 74. If the betting tax could be reduced or abolished the ramifications would be very wide. First, we would have increased attendances at race meetings; people would rather go racing and have a bet there than go to a betting shop, where they have to pay a 6 per cent. tax.
Secondly, the increase in the number of people attending race meetings would produce a stronger betting market. Previous speakers have emphasised that it would mean a wider variation in prices. The starting price emanates from the racecourse, and a wider range of prices might even attract further off-course punters, thereby increasing the revenue to the Chancellor.
Thirdly, as was mentioned by my hon. Friend the Member for the Isle of Thanet

(Mr. Rees-Davies), the prize money could be increased. At the moment racecourses rely for their income on owners' entry fees, attendance fees, the sale of race cards and car parking. If there was an increase in attendances the amount of prize money could be increased and that, in turn, would have an effect. Not all the money goes to the winning owner; 10 per cent. goes automatically to the trainer, 7½ per cent. goes automatically to the jockey and 2½ per cent. goes to the stable. That 2½ per cent. is very important, because on the whole the workers in stables are not well paid and depend largely on the generosity of owners.
Fourthly, we should be able to improve the amenities at racecourses. The hon. Member for Newcastle-under-Lyme (Mr. Golding) might be able to get a better cup of tea at Uttoxeter.
We have already heard that the tote is in great trouble. Any help that we can give it in terms of on-course tax would be welcome. I therefore support the new Clause and I ask my right hon. Friend to listen to the arguments put forward and consider either the abolition of the tax or its reduction to 2½ per cent. I hope that he will bear in mind the six points that I have raised—increased attendance; a stronger market; increased prize money; more contented stables; help for the tote; and better amenities.

Mr. Taverne: It is clear that the tote is in deep trouble. We want to know what the Government's attitude is to that predicament. Will they apply their "lame duck" philosophy, or, if the kind of solution advocated in one or other of the new Clauses does not commend itself to the Government, what other plans have they to deal with the problem?
Second, on the face of it, as my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) said when he intervened during the speech of my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), the case for a differential rate between on-course and off-course has always seemed attractive. There is, however, one danger which its advocates have not always recognised, I think; that is, the danger of evasion. I understand that this danger was considerable, but it could, perhaps, be met if a differential rate were introduced gradually.
Last year a slight differential was introduced. Perhaps the Government could tell us how this has worked, and whether, on the basis of the experience gained of working a marginal differential, a somewhat larger differential might now be possible to achieve the results which many hon. Members on both sides would favour.

Mr. Hastings: Most of the points which should be deployed have already been made, and we have heard a number of interesting speeches. My hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) gave a most eloquent exposition of the case for the new Clause, and I was delighted that my hon. Friend the Member for the City of Chester (Mr. Temple) was able to move it, for the third time, I believe, since he came to the House. I am sure that the Government will take note of what has been said.
My only misfortune now is that I have lost my notes, and I shall have to do my best without them. I recall that my hon. Friend the Member for the City of Chester said that I had had a great deal to do with the tote. Like most of us, I have been in and out of the place from time to time, but I do not think that that necessarily qualifies me to speak in this debate. My interest in the matter arose from a lifelong interest in horse racing, and from an occasion when my well-known enthusiasm for the Industrial Relations Bill became a little less than strong one morning and I escaped to the Gold Cup at Cheltenham, a place which has always had a nostalgic apeal for me since the last race I rode in this country was at Cheltenham. I wish I could say that I succeeded; but I got round, anyway.
In the course of interesting conversations at Cheltenham with members of the Totalisator Board, I became impressed by the extreme difficulties under which they are required to operate. Their difficulties stem from the failure of anyone—Government, Home Office or anyone responsible—to decide whether they are required to operate as a commercial concern or as a public facility operating under strict requirements imposed upon them by Statute. If that could be cleared up one way or the other, their lot would, I believe, be much easier.
The tote is not allowed, for instance, to deal in ante-post betting. It is not allowed to deal in bets on anything but horse racing, which puts it in a category very different from the bookmakers, and, as one hon. Member said, it has no capital as such with which to engage in competition with bookmakers. I think it fair to say that the totalisator saw the opportunity of betting shops as quickly as any of its competitors, but it was unable to seize and profit from it because it has no capital, either equity or Government, and, in fact, it operates on an overdraft or on bonds.
Such a situation is most unfortunate. If the totalisator were unable to operate it would be a grave loss to racing as a whole. It has now reached a stage after three years of running at a loss when the Government must do something to help it. The differentiation between on-course and off-course betting which is involved in the second part of the Clause in particular has already been admitted by the Government. All we are now asking is that the principle should be extended to avert what might well be a disaster for a sport which many people in every walk of life enjoy. That would be a tragedy for the country.
I hope very much that the points made in the debate will commend themselves to my hon. Friend. I think that there has been only one speech against the proposal, and that was the speech of the hon. Member for Newcastle-under-Lyme (Mr. Golding), the original Marxist analysis of horse-racing—"Horses of the world unite. You have nothing to lose but your capitalist jockeys". I found it difficult to decide whether the hon. Gentleman was for or against, but in the end came to the conclusion that he was against. He was answered effectively by his hon. Friend the ex-Minister for Sport. I am sure that we can discount his arguments, such as they were.
There has been a weight of argument in favour of the Clause. I cannot believe that my hon. Friend is insensible to it.

Mr. Paget: For a good many years I was a member of the Tote Board. In those years we did a good deal for racing. We made quite a lot of money, and we were not really impeded by the Act. It enabled us to do the job for which we had been appointed, and it worked very


effectively. What killed the tote was the turnover tax. Anybody who applied that percentage to the performance of the tote before the tax was put on knew that it must be crushed by the tax. The tote simply could not carry it, and it cannot now.
The hon. and gallant Member for Lichfield and Tamworth (Major-General Jack d'Avigdor-Goldsmid) said that British racing and British horses were the best in the world. I can remember when they were, but they certainly are not now. I doubt whether we are in the first five, whether we assess this by the quality of the courses, the quality of the facilities, the cost to the public or the quality of the horses. I suppose that American racing comes first, then French, then Irish, and then probably Australian, and, trailing last, ourselves. The quality of our horses has fallen, as has the quality of our facilities. The reason why all the other racing prospers whereas we become more decadent, and, frankly more dishonest, is simply that betting is allowed to finance racing in those countries and it is not allowed to finance it here.
I have always favoured a tote monopoly, which is the French system. I do not find that the bookmaking profession is a very productive element in the country or, indeed, in the sport. Certainly, it is the source of corruption in racing. Without it corruption does not really occur in French racing. I do not remember when there was last a scandal there. The French system works astonishingly well. Our racing will become a very small, sordid and rather unworkable thing unless something is done to help the racecourses.
I can describe myself as an ex-racing man turned television viewer. I find today that, unless I have an interest in a particular horse which I go to watch, racing is much more pleasant on the television, and I pay nothing for it.
Surely this is a very sensible proposal. I believe that racing should have the advantage of being able to tax betting. But if we cannot have that and have a tote monopoly, let us excuse the on-course betting, and let those who enjoy their racing from newspapers and television at least contribute by carrying the betting tax.

10.45 p.m.

Mr. Maurice Macmillan: This debate has, with few exceptions, been characterised by the personal knowledge, expertise and interest of those who have taken part in it from both sides. It must also be admitted by all those who have heard it that the main object of the new Clauses is not to gain a particular sectarian advantage for one group of persons over another but to find a method of solving a problem which has been clearly identified and stated in its various aspects by various speakers. That is, broadly speaking, the hope of the entire industry, and of the bloodstock industry which is associated with it.
It was suggested by my hon. Friend the Member for City of Chester (Mr. Temple) that I was answering as the only Treasury Minister who was in no way associated with having moved a similar Clause when in Opposition, but in these circumstances perhaps I should declare what I might call a mild interest of a reverse kind. As a part-owner of what my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) would call "a poor racehorse", I think that, if anything, I should benefit indirectly from the sort of measures which have been suggested.
If I may say so, I think that there has been a slight confusion between two things. It seems to me that the Clauses seek to kill two birds with one stone, and, if I may switch metaphors, there is a danger that those who have tabled the Clauses have fallen between two stools. The linking of the tote and its difficulties with the effect on the attendance at racecourses of the on-course betting duty is largely an attempt to deploy the issue which was put by the hon. and learned Member for Northampton (Mr. Paget). It is the problem of getting money from betting into racing which underlies the Clauses, and I must admit that I am by no means certain that this linking is necessarily the right way of dealing with this group of problems.
Perhaps I may now try to examine the effect of the duty and charges on attendance and other matters. When the duty went up in March, 1968, from 2½ per cent. to 5 per cent., in the financial year 1968–69 the general betting turnover dropped by some 8 per cent., the on-course betting on horses dropped by 18


per cent., and the off-course betting on horses dropped by 6 per cent. However, by the financial year 1969–70, general betting total turnover was back to the previous year's level, but the on-course betting on horses had not recovered, although the off-course betting on horses had.
Then came the 1970 Budget when not only was the bookmakers' premises licence duty revised but the off-course betting duty was put up by 6 per cent. and hedging bets on course were exempt. Comparing the financial year 1970–71 with 1969–70–and this meets the point made by the hon. and learned Member for Northampton—the total turnover of general betting then dutiable went up by 3 per cent., on-course betting on horses went up by 11 per cent., and off-course betting on horses by 3 per cent.
This is an indication that the argument put forward by my hon. and gallant Friend the Member for Lichfield and Tamworth (Major-General Jack d'Avigdor-Goldsmid) was more direct than some of the others adduced in the debate, for he made it clear that he thought that the difficulty was the tax on on-course betting rather than the differential between on-course and off-course betting. Certainly no one in the betting industry, or in the racing industry as a whole, would wish for any increase in off-course taxation in order to widen the differential. What is being suggested is that the attendance at race meetings may be encouraged by halving or abolishing the tax, that that may be a material factor in the recovery of attendance and the recovery of gate money and the benefits which would flow from that.
The total abolition of on-course duty and the treatment of all tote betting as if it were on-course would cost about £9 million to £10 million in revenue. Even halving the on-course betting duty would decrease the revenue from total betting sources by at least £5 million.
The differential was introduced last year and it is a little early to say whether it is having any great effect. The changes in the betting tax, so far as it has a history, have a history of changing things in the first years with the situation tending to be restored in the second year. This would be the first time for three

years that there had been no alteration in betting duty, and it would be a good thing to try to reach a certain degree of stabilisation in the matter.

Mr. Temple: My hon. Friend has given a figure of £9 million as the revenue from all on-course betting duties. The figure of £5 million has been frequently used during the debate and it has come from authoritative sources. As my hon. Friend's figure does not exactly agree 100 per cent. with mine, could he give a breakdown of the £9 million?

Mr. Macmillan: It is a slightly complex calculation, but it is based on the fact that there would be a loss in off-course betting to on-course which would tend to reduce the yield from the off-course tax.
My hon. Friend is perfectly right—the total on-course betting tax on bookmakers last year was £5·215 million; the tote was £3·746 million; giving a total of nearly £9 million of on-course betting duty in all. That extra is to take account of any switching, the effect which, if he is correct in his arguments in moving this new Clause, my hon. Friend the Member for the City of Chester would wish to see.

Mr. Temple: My hon. Friend has now admitted that £9 million is a hypothetical figure and that it included what I might call the postulated switch from off-course to on-course betting. I think it misleading to use £9 million, and it would have been better if he had stuck to the actual figure of £5 million.

Mr. Macmillan: No, I hope I did not mislead. I had no intention of doing so. I hope I made clear that what would cost £9 milion to £9½ million was the total elimination of on-course tax plus the relief of the tote from taxation by treating all tote transactions as if they had been on-course. The on-course element from the bookmaker is £5,250,000 and the tote element is £3,750,000.

Mr. Rees-Davies: The figure is exactly this: £2·95 million which is totalisator, dogs; £1·52 million which is totalisator, horses; £2·77 million which is on-course horses with bookmakers; and about £2·4 million which is dogs and horses on-course, making up the total, the presumption being that if one makes the deduction, one must make it for horses and


dogs, which I think one must. But that is not the argument relating to the removal of tax on course betting for horses only.
On top is the hypothetical assertion of the Treasury that when one looks at this one has to say that if people do not bet off-course but go on-course, one will therefore lose the money one made off-course, which does not necessarily follow.

Mr. Macmillan: Presumably one would hope, in moving this new Clause, to see this kind of increase in on-course betting. I do not think it would be reasonable, in view of what those using the argument have said about new facilities, to assume that it will all be new racegoers going to meetings rather than staying at home, instead of the hon. and learned Member for Northampton (Mr. Paget) leaving his television and going back to the course, because it is more comfortable There is bound to be a certain switching element, I must apologise for unintentionally misleading my hon. Friend by giving a total which included all the figures of on-course betting on horses and dogs. The other total of £5 million is far the more limited new Clause—the "horses only" proposition.
It is true that off-course betting, however one looks at it, is much the larger yield, and it is equally true that the tote is getting a decreasing proportion of the business.
If I could turn to the argument of my hon. Friend the Member for the Isle of Thanet and others about prize money and perhaps also mention the argument of the hon. Member for Newcastle-under-Lyme (Mr. Golding), the difficulty about the large sums of prize money which other countries are able to produce is that other countries do not, on the whole, seek to maintain the relatively large number of separate racecourses and they have a tote monopoly which provides a great deal of money, coming back from betting to racing in amenities on courses and prize money to the owners. We are not discussing large subsidies to a lot of rich men who wish to engage in racing. It is wrong to say that the home punter does not equally depend on the health of the sport. If it does not continue, he will not have anything to punt on.
11.0 p.m.
The suggestion of the hon. Member for Newcastle-under-Lyme that improvements could be made from the profits of the owners of racecourses was met by hon. Members who pointed out that the return on capital invested in racecourses is very low. But if racecourses were to be run in order to optimise profit throughout the industry, there would be far fewer facilities and racecourses, to the detriment of those who wish to attend them and the local nature of many meetings.
There is no doubt that the tote needs help and support. My right hon. Friend the Home Secretary has made it clear in a Written Answer that he accepts the purposes and objects for which the tote was established and attaches importance to its continuing rôle in providing an alternative form of betting on horse races. I am sure that its rôle is important. There are a number of ways in which the Tote Board should perhaps adjust itself to change. The question of the rate of overheads, the method of operating, whether place betting is reasonable and profitable, the question of doing more forecasting and even the vexed and controversial quetsion of moving over to the tiercé are matters which should be considered before any question arises of putting the tote in a special privileged position as regards on-course and off-course betting.
Part of the reason for wishing to have a differential between on-course and off-course betting was to reconcile the preferential treatment to the tote by ensuring that on-course the bookmakers received the same preferential treatment in the light of the fact that the tote is always on-course to all intents and purposes. I am not happy with this linking as I do not think that the case has been established that the differential in the duty is enough in itself to have a significant effect on attendances. We should examine that very carefully, just as we should examine the difficulties in which the tote undoubtedly finds itself.
I must admit to a certain personal regret in being unable to accept any of the new Clauses, but I ask the House not to press them. I assure the House that there is at least one member of the Treasury Bench who is only too aware of the difficulties which face the tote and, from bitter personal experience, of the discomforts that face many racegoers on


some racecourses, particularly in winter, and of the inadequacy of any return from even part ownership of a partly successful animal.

Mr. Temple: I thank my hon. Friend for that careful reply, while expressing extreme disappointment. We all seek to improve the health of the bloodstock industry, and my hon. Friends and I thought that this was the way to go about the matter. I was interested to note that my hon. Friend admitted two things. First, there are the difficulties which surrounded the tote. The Clause sought to give help for that reason. My hon. Friend has given valuable information about the Treasury's thinking over the future of the tote. I have always thought that the tote had a rôle to play in a healthy racing industry.
My hon. Friend said that the tote might be placed in a privileged position. He was thinking in terms of betting taxation. The approach we have put forward was reasonable and would have assisted the tote but would not have lost the Treasury the amounts of money my hon. Friend suggested. I was sorry to have a slight altercation with my hon. Friend but I think that he was wrong in fearing losses of between £5m. and £9m. as a result of the new Clause. The Clause would have lost half that amount because it sought only to halve the betting duties on on-course betting.
I could not agree about the amount of money the Treasury felt it would lose because I made it clear that it was expected that the on-course turnover, which is such an important factor in any market situation, would have improved. I shall have regard to my hon. Friend's request not to press the Clause. I have in mind that we must approach this problem in what I call in racing terms "softly, softly" might catch a "monkey" and if it does so on another occasion I will be happy. We have won these long battles over a period of years and this is a step in the right direction. My hon. Friends can take heart from the Treasury reply. If we sustain this battle for another year or two we shall probably succeed. In the hope that that will be the case I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

New Clause 11

CONTRIBUTION TOWARDS MAINTENANCE OF A CONTRACT OR POLICY OF INSURANCE

Where, pursuant to the National Health Service (Superannuation) Regulations 1961 or any statutory modification thereof for the time being in force, the Secretary of State for Social Services in any year of assessment pays to a practitioner (as defined in those regulations) a contribution towards the maintenance of a contract or policy of insurance held by that practitioner such contribution shall be deemed for all purposes of the Income Tax Acts to be income of the practitioner for that year of assessment and shall cease to be assessable to tax under Case III of Schedule D and shall henceforth only be assessable to tax under Case II of Schedule D.—[Mr. Dell.]

Brought up, and read the First time.

Mr. Dell: I beg to move, That the Clause be read a Second time.
The main object in tabling the Clause is to hear the Treasury's reaction to representations made to it by a deputation which waited on it last February. I understand that these representations were sympathetically received but that no commitment was made. The background is that when the National Health Service was introduced 800 doctors exercised the option to opt out of the service superannuation scheme.
To do this, agreed endowment policies had to be set aside for this purpose with an undertaking that the policies should not be assigned. A total of 8 per cent. of the doctor's superannuable income has been paid by his executive council. For many years the contributions were taxed on an earned income level. Recently it has been insisted that they should be taxed as unearned income, in reliance on the case of Leahy v. Hawkins. This seriously affects the tax position of the doctors concerned. Would the Treasury be prepared to accept a Clause of this kind, which is intended to restore the earlier position?

Mr. Patrick Jenkin: I am grateful to the right hon. Member for Birkenhead (Mr. Dell) for moving the new Clause so briefly, because that will enable me to reply briefly without seeming to be guilty of discourtesy either to him or to the House.
The right hon. Gentleman has quite rightly set the context in which this matter arises in the introduction of the


National Health Service and the arrangement which was made with the doctors shortly thereafter. On only one point would I take issue with him. The case of Leahy v. Hawkins was in 1952, and it was in that case that the High Court decided that the appropriate tax treatment of these payments made by the authorities in respect of a doctor's service was to tax them under Case III of Schedule D and not as part of his Case II remuneration. The doctor in question had appealed on the footing that the payment should not be taxed at all. If there was ever a case of the fox and the grapes, this was it.
So far from gaining the contention that the payment should not be taxed, the result—not only in the case of the doctor, but in the case of all the other 800-odd doctors—was the treatment of the payment as a Case III receipt. That meant that it did not qualify for earned income relief. I well remember, last February, receiving a deputation to discuss these matters, and I hope that I would always have received such a deputation sympathetically, because I was anxious to hear the case that was made.
The difficulty of the Inland Revenue in this matter is that the law is quite clearly stated in the High Court and the doctor did not appeal. No other doctor has thought it worth while to pursue the case to a higher court to try, perhaps, to reverse the judgment in Leahy v. Hawkins. In those circumstances, the Inland Revenue has no option but to tax the payments in the manner which the court declared to be the law.

Mr. Paget: Surely that is why we are pressing to change the law.

Mr. Jenkin: The hon. and learned Gentleman is very perceptive. His right hon. Friend has moved a new Clause to change the tax treatment.
This is a fading problem because as the doctors retire so the matter becomes less relevant. Every year there are doctors who retire and these are, on the whole, the older doctors in the National Health Service.
Secondly, the reality of the matter is the earned income relief. This is what the doctors are interested in. It is now worth a good deal more than it was in 1952, when the case was decided, because of the

changes that were made in 1957, in 1961 and, again, in this year's Bill. I can understand that there is, therefore, a growing feeling that perhaps something should be done.
We also have to look at this matter, however, in the context of the tax reform which my right hon. Friend the Chancellor announced in the Budget and which is embodied in Part III of the Bill, under which, as the right hon. Gentleman will remember, the first slice of investment income will after 1973 be taxed at the rate appropriate to earned income.
Perhaps, without going in any way to disclose the figures—although no decision has been reached about what the first slice will be—I may put the matter into some sort of context. Taking the average doctor's remuneration, less the expenses which he is allowed to charge, of £4,800, the 8 per cent. National Health Service payment amounts to £384. Applying the 15 per cent. earned income relief and taxing it as Case II rather than Case III. the difference in the amount of tax would be about £23.
It is not as if it is a very major matter for the taxpayers. That would indicate the sort of sum that might be involved should the first slice be sufficient to take account of the payment of that order, but I am making absolutely no forecasts and giving no indication that that is what it would be.
11.15 p.m.
One is not talking about a substantial sum in relation to these payments, and my advice to the House, therefore, is that it would be right to let the case of Leahy v. Hawkins stand, as it has stood for nearly 20 years without challenge by the medical profession, until 1973–74 when the new arrangements come in.
In the light of this I give the right hon. Gentleman a categorical assurance that, if I still have any responsibility for these matters, I will undertake to look at this again to see whether any further changes are necessary. I hope with that assurance the right hon. Gentleman will feel able to withdraw his new Clause.

Mr. Dell: I am grateful to the Financial Secretary for his sympathetic approach, and, in view of his assurance, I beg leave to withdraw the new Clause.

Motion and Clause, by leave, withdrawn.

New Clause 17

(ESTATE DUTY, GIFTS, PERIOD OF CHARGE REDUCED FROM SEVEN TO FIVE YEARS).

Subsection (1) and (2) of section 35 of the Finance Act 1968 shall be repealed and the provisions of subsection 1 of section 64 of the Finance Act 1960 shall be revived.—[Mr. William Clark.]

Brought up, and read the First time.

Mr. William Clark: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker (Miss Harvie Anderson): I think it would be for the convenience of the House to discuss at the same time new Clause 18–"Estate Duty: property in which the deceased had an interest".

Mr. Clark: The last time this matter was debated was in May 1968. I approach this debate with some degree of confidence in that my hon. Friend the Financial Secretary in the May, 1968, debate took a leading part in criticising the Labour Government for changing the gift inter vivos rule from five to seven years. It will be remembered that before March, 1968, the gift inter vivos was over a five-year period. If death occurred within the first two years, 100 per cent. duty was levied, but if death occurred in the third, fourth or fifth year the amount of duty was proportionately reduced. Any period, whether it be two, three, five, seven or ten years is an arbitrary length of time, but seven years is far too long for a gift inter vivos. We think the time has come to go back to the five-year rule with suitable tapering, and I hope that my hon. Friend will look upon this sympathetically.
An investigation is going on within the Treasury into the whole of estate duty taxation, and possibly this point could be taken up in the investigation. I do not say this in any churlish sense, but I hope my hon. Friend will not give me a Treasury brief, because I would remind him of what he said in the May, 1968, debate:
It is always surprising and a little regrettable when the Financial Secretary, for whom we have such a high regard, finds himself obliged to resort to a Treasury brief which is as unsympathetic and as unforthcoming as that brief was."—[OFFICIAL REPORT, Standing Committee A, 29th May, 1968; c. 1708.]

I hope that, after he has replied, I shall not have to say to my hon. Friend what he said to the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) in a similar debate.
I urge upon my hon. Friend that the cost would be very small, and if we want to see the distribution of wealth before death, seven years is far too long. The five-year period was in force for some time and was very satisfactory. I commend the new Clause to my hon. Friend and look forward, in view of his past record in the May, 1968, debate, to a favourable response.

Mr. Patrick Jenkin: I am grateful to my hon. Friend the Member for Surrey, East (Mr. William Clark) for recalling my speech of 1968 when our predecessors introduced a provision to increase from five to seven years the period outside which a gift must be made to escape estate duty as part of the donor's estate. The part of that speech which I was particularly concerned to get on the record was that dealing with retrospection. I can now repeat that the principles I then annunciated will, I hope, be the principles which will motivate the present Government in dealing with retrospective legislation in relation to estate duty.
We attacked the proposal generally because the burden it would impose, particularly upon executors and to some extent upon donees, was thereby considerably exacerbated. The tapering did not take place until the fifth, sixth and seventh year and therefore a gift was left subject to the full charge of estate duty for the first four years after it had been made. It seemed to us that this provision exemplified much of what is wrong with the present estate duty and other capital tax systems, in that the tax pressed much too hardly upon much too narrow a base. It is for this reason that my right hon. Friend has, as part of our continuing review of the tax system, indicated that the taxation of capital is an important part of our studies.
My hon. Friend was kind enough to throw me, as it were, a lifeline which I gladly pick up. I can assure him that we have this point very much in mind. We would not think it right to legislate piecemeal for minor changes in the shape of the estate duty. Although we have increased the exemption limit from


£10,000 to £12,500, more as an earnest of our desire to seek to help those who die leaving relatively small estates, we do not put that forward as our final word on estate duty. I hope that, with my assurance that this point will be considered as part of our review of the general system of taxation in the coming year, my hon. Friend will feel it right not to press the Motion.

Mr. Taverne: I am glad that the Financial Secretary has resisted the blandishments of the hon. Member for Surrey, East (Mr. William Clark). But some of the remarks which he has made about the review of estate duty fill me and my colleagues with alarm. The idea of a five-year period is acceptable if it is coupled with a gifts tax. It is surprising to find how many people, even Conservatives, favour the principle of a gifts tax as one which would extend justice. If one does not have a gifts tax, one must have a longer period, otherwise estate duty is too easy to evade. I welcome the hon. Gentleman's resistance of the new Clause, but I shall study carefully what comes out of the review of estate duty to which the Government have referred on a number of occasions.

Mr. William Clark: I do not entirely agree with the hon. and learned Member for Lincoln (Mr. Taverne) that my hon. Friend the Financial Secretary has resisted blandishments advocated on behalf of the new Clause. I would put it rather that he has temporarily resisted them. But with the assurance my hon. Friend has given that he will look at the whole question of gifts inter vivos and the tapering provisions in the Government's review, I beg to ask leave to withdraw the Motion.

Motion, and Clause, by leave withdrawn.

New Clause 22

EXEMPTION FROM INCOME TAX OF ALLOWANCE PAID TO MEMBERS OF LIFEBOAT CREWS FOR TIME SPENT SAVING LIFE AT SEA

Exemption shall be granted from income tax chargeable by virtue of section 156 of the Income Tax Act, 1952, in respect of any allowances awarded or other payments made, by the Royal National Life-Boat Institution to duly appointed coxwains and crew members

of the lifeboats of the Institution solely in recognition of time spent at sea in the lifeboats with the express intention of saving human life at sea.—[Mr. W. H. K. Baker.]

Brought up, and read the First time.

Mr. W. H. K. Baker: I beg to move, That the Clause be read a Second time.
Similar new Clauses have been brought before the House before—on the 1950 and 1967 Finance Bills. I took part in the debates on the proposal in 1967. It is interesting to note that on both those occasions a Labour Government were in power. I am therefore hopeful that this will be third time lucky, because my plea is addressed to a Conservative Government who are pledged to reduce taxation and, indeed, to have a very close look at the whole of our taxation system.
The new Clause seeks to exempt from payment of tax lifeboatmen in the course of their duties while at sea attempting to save life. It is not in any way asking for exemption for all earnings of life-boatmen. It is not asking, for example, for exemption for payment made during a training run for the boat; neither is it asking for exemption from tax for full-time members of lifeboats such as those employed by the R.N.L.I. in the course of maintenance work—engineers, and the like. I repeat, it is a plea for the volunteers who man our lifeboats in trying to save life.
The House knows that the R.N.L.I. is a wholly voluntary supported charity. It obtains its funds by flag days all over the United Kingdom, by local lifeboat guild functions along the coasts, and by holding coffee mornings, jumble sales and ordinary sales at all seasons of the year.
Coming from and having the honour to represent a largely fishing constituency, I can tell the House quite definitely that the work of the lifeboats is an integral part of the local community. The support is national; the actions of the crew are local. A storm at sea is by no means uncommon, but the lifeboats around our coasts are almost as commonplace as the St. John's Ambulance men at sporting and other events throughout the country. They are in themselves two integral parts of the community and both as indispensable in their own particular ways as each other.
A storm at sea instantly brings anxiety in many homes around our shores; not least in those communities which are supported by or support the inshore fishing industry. Indeed, many of the lifeboats are crewed by inshore fishermen—in some cases, wholly so. These men are prepared to give up a day's earnings to enable them to take part in rescues at sea. They are, to say the least, extremely brave men—I think that that is a vast understatement and is scarcely worth making—who are always ready to hazard their lives in the hope of saving the lives of their fellow men at sea.
It might assist the House if I give a few figures. In 1970 the total launches of lifeboats around our coasts was 2,634. Of these, 1,216 were by conventional lifeboats. The remainder, 1,418, were by inshore rescue craft. The result of all these launchings was that 1,251 men—not an inconsiderable figure—were saved from drowning at sea. This works out at roughly one life saved for every launching of a lifeboat.
With two notable exceptions, to which I shall refer later, there has fortunately been no loss of life among lifeboat crews since 1965. Nevertheless, during that period 73 crew members have either been badly or less seriously injured since 1968.
The exceptions I mentioned were, of course, the tragic disasters of the Long-hope boat, which foundered on 17th March, 1969, with the loss of eight crew men, and that of the Fraserburgh boat on 21st January, 1970, when five of the crew died. Their sacrifice was supreme.
11.30 p.m.
The present allowance paid to lifeboat-men for saving life at sea is £1.50 for the first two hours spent at sea and thereafter 38p for each subsequent hour at sea. Over the last year, that has given an average allowance of £2 to £3 per crew member for every launching. Those figures for the allowances paid are not by any means large. They are a pittance for the bravery shown by these men. If we put those figures into terms of taxation at a rate of, say, 20p in the pound, they represent a mere £10,000 that the Revenue takes as a result of this taxation. That is by no means a large sum. In presenting the new Clause, all we are asking for is a shortfall to the Revenue

of £10,000 which, in modern budgetary terms, is literally a drop in the ocean.
It is important to realise that there is no contractual agreement between the Royal National Life-Boat Institution and the crewmen. Therefore, there is no employer-employee relationship. The exception is the coxswain, who is chosen and appointed locally, as are the second coxswain and the bowman. Each receive an annual retainer of £100. We are not asking for exemption from taxation for those men, but we are asking for tax relief on that sum paid in allowances when at sea saving or attempting to save life. As there is no contractual agreement it is quite unthinkable that any kind of compulsion is put upon the crewmen to turn out. It is entirely up to them whether they turn out when the maroon goes up. In every sense they are volunteers; volunteers of the best possible calibre.
My hon. Friends and I realise that there are other categories of voluntary workers who have a like case with regard to taxation. I give but one example, that of firemen. Nobody would deny that people such as firemen face hazards in their calling, hazards which are voluntarily undertaken. But with the examples that I have given, such as the disasters met by the Longhope and Fraserburgh lifeboats, the enormous risks that these men face when going to sea are quite apparent. It is true that a great number of them come as volunteers from the inshore fishing industry and that they know the hazards to which they put themselves in attempting possibly to save their comrades.
All these facts add up to a continuing piece of niggardly legislation in that their allowances are taxed. We want to stop that because it is unjust and because we feel that the recruitment to lifeboat crews may, to a marginal extent, be affected by the fact that allowances are taxable. The Institution, its crew members, and all those who have to do with the sea are owed an enormous debt by the nation, not least by those along our coasts who come from the inshore fishing industry, from the deep sea industry, from the merchant marine, and indeed by all those who have their business at sea. I therefore greatly hope that the third time will be lucky and that my hon.


Friend the Chief Secretary will be able to accept the Clause.

Mr. Iain Sproat: I congratulate my hon. Friend the Member for Banff (Mr. W. H. K. Baker) on bringing forward the Clause and in seeking to remedy a peculiarly petty injustice to a most worthy body of men. In view of the late hour I will not follow my hon. Friend into all the telling figures he deployed in support of his case.
I ask my hon. Friend the Chief Secretary to ponder and weigh three facts. First, it is not exaggeration or hyperbole when we say that lifeboatmen risk their lives that those of others might be saved. Second, these men receive allowances of only £1·50 and, after that, only 38p an hour for this duty. Third, in the last year alone they have saved 1,251 lives. Is not my hon. Friend forced to the conclusion that we are getting a magnificent service on the cheap? To accede to this request would cost the Treasury less than £10,000, probably. Does my hon. Friend set so little store on the courage and service of these men? I hope not.
The last time that the matter was discussed in the House—in 1967–the then Treasury spokesman trotted out a whole lot of threadbare arguments such as forms of employment, danger money, the need to prove financial loss, as though these men were jurors or members of hospital management boards, and the danger that if this concession were granted the floodgates would be opened for many other claims. These were arguments as unimpressive intellectually as they were mean and lacking in generosity emotionally. They were ripped apart by hon. Members who spoke in that debate. I hope we shall hear no arguments of that type from my hon. Friend the Financial Secretary tonight.
Nobody did more in that debate to show up the foolishness of these arguments than the late Mr. Iain Macleod who replied from the Opposition Front Bench. He said, "We know that there are difficulties. All we are asking is that a way be found round the difficulties. We must do something". I hope that my hon. Friend the Financial Secretary, who has followed in the late Iain Macleod's footsteps so wisely and so well in so many matters at the Treasury,

will follow in his footsteps in this matter and do something about this matter now.
At the General Election people voted for a change in Government for many specific reasons, but also no less for certain general reasons which were not often articulated and perhaps not even spoken. Among those general reasons for which the Conservative Government were elected—reasons often poorly articulated but deeply felt—was the sentiment that resources and rewards were too often misdirected. I do not want to go into details, but, for example, scarcely trained secretaries could earn more than nurses; the average wage of dockers was more than the average earnings of solicitors; too often it paid a man not to go to work and earn an honest living but, instead, to go on to welfare. Those facts worried our people. There was a general feeling that hard work, thrift and service were less well rewarded than they ought to have been.
I do not think that my hon. and right hon. Friends would dispute that when we were returned to power it was because, amongst other specific promises, like pensions for the over-80s, and other selective examples of welfare, we said that we would provide selectivity in a general sense. Surely this is an opportunity to put this matter right—to reward one uniquely-placed and uniquely-deserving section of the community which embodies so many of those qualities that we would hope to see flourishing in our society today.

Mr. Hamish Gray: I congratulate my hon. Friend the Member for Banff (Mr. W. H. K. Baker) on the way in which he presented the new Clause and my hon. Friend the Member for Aberdeen, South (Mr Sproat) on his support. I shall be extremely brief. Most of the relevant points have already been made, but I hope that my hon. and right hon. Friends on the Front Bench will not forget that this is a very serious plea. I am sure that my right hon. Friend the Chancellor of the Exchequer is inundated through-our our proceedings on every Finance Bill with reasonable cases for exemption for various sections of the community, but nobody could say that those who rescue lives at sea are not worthy of serious consideration.
It saddens me to look across at the benches opposite and see there only two hon. Members who are sufficiently interested in the Clause to attend the House—and there is not one Scottish Labour Member. That is a revealing fact; it shows where their priorities lie. We are pleading for a relatively small section of the community. It is significant that because they do not represent a vast vote-catching area they do not attract the same attention among hon. Members opposite as they do among hon. Members on this side of the House.
I support wholeheartedly the plea of my hon. Friends the Members for Banff and Aberdeen, South on behalf of people who spend their spare time—because virtually it is their spare time—helping to make the seas safe. I will say no more. I am grateful to have had the opportunity to contribute at this stage of the debate.

Dame Irene Ward: I hope and believe that the Clause will be acceptable. In my part of the world, too, we have great service from those who man the lifeboats.
I have one small personal reason for supporting the Clause: my first public service ever was when I became honorary secretary, in Newcastle-upon-Tyne, for an organisation that was raising funds for all the lifeboat services. I always feel that whenever the opportunity occurs I should add my voice in support of their cause.
11.45 p.m.
The case has been well argued, and, indeed, it is well known. I wish to add a further point. No concession by the Treasury would give greater pleasure to the people of this country. I hope that we shall not hear about all sorts of difficulties. We are so used to difficulties in life that we sometimes forget how many difficulties we have had to overcome. If we had not overcome a lot of difficulties during the war, we should not have won the war. We can overcome the difficulties if we really want to, so that argument does not stand up. Whatever the difficulties, the Treasury ought occasionally to do something acceptable to the whole country. Everyone knows and admires what the lifeboatmen do.
In Finance Bill after Finance Bill, back benchers ask for things, and the

Treasury turns them down. If I had time, I could give a long list of concessions which the country generally would welcome. Time after time, we have to bring these matters before the House, but we can never succeed unless the Treasury is willing to be convinced, and sometimes it is rather difficult to know why it is convinced while on other occasions it remains unconvinced.
The new Clause embodies a fine idea, and it is absolutely right to press it on the Treasury. I was glad that my hon. Friend the Member for Aberdeen, South (Mr. Sproat) referred to what Iain Macleod had said. I am sure that he would have liked to make this concession, and I know that the House would like to do something in the spirit of what he spoke for and supported. It is not good for Parliament that back benchers have to bring forward a good case year after year, only to have it turned down. It is difficult enough to have one's Amendment or new Clause selected, but, once we have a chance to make the case, as we have on this occasion, the Treasury should accept it.
We are trying to be a modern Government, not always following the traditions of the past. A lot of traditions are good, but a lot are jolly bad, and the tradition of always refusing the case on this Clause is very bad. Let the Treasury accept the Clause with gratitude. After all, Treasury Ministers are as grateful to the lifeboat-men as everyone else is. Let them accept the Clause in a good spirit, so that we can all go home thinking that, at last, Parliament has done what it should for our lifeboatmen.

Mr. Maurice Macmillan: We all have great admiration for lifeboatmen and the work they do. I in no way wish to suggest that that work is not worthy not only of our admiration but also of proper reward by the community, but I shall ask the House to reject the Clause.
The reason has nothing to do with what it would cost the Revenue, which is a very small amount. We must realise what the Clause asks for. It asks not that the lifeboatmen should get a greater reward for the trips they make in saving life at sea but that the charity which provides that reward should have the burdens on it reduced by having to provide only a net rather than a gross sum, because what it provides will be tax-exempt. It is here that the question of


fairness and differentiation between them and other similarly deserving people comes in.
The unique quality which has been claimed for lifeboatmen is not that they give service to others, for there are many members of our community who do that, and not only that giving service to others brings their own lives into danger, because there are many others who with equal gallantry do the same. There is a third qualification which it has been suggested should single out lifeboatmen from other members of the community who risk their lives to serve the community, and that is that the funds from which the allowance is paid are raised on a voluntary basis. That is why I say that the Clause is in a sense asking that those who receive this type of reward from a charity should be exempted from tax, and it is just that that makes the difficulty very great, because there are other people who are rewarded from charities for serving the community, and there are other members of the community who take those risks.
My hon. Friend the Member for Aberdeen, South (Mr. Sproat) said that the allowance was a pittance. I agree. There is a great deal to be said for that pittance being increased. There is perhaps a great deal to be said for the amounts received by, for example, mine rescue teams being increased. They get a very similar amount—a call-out payment of slightly more than a lifeboatman, £2.75 for the first two hours, and 47p an hour, with a little more if breathing apparatus is used. They are taxed in the same way.

Mr. W. H. K. Baker: Why cannot my hon. Friend exempt them as well as the lifeboatmen?

Mr. Macmillan: My hon. Friend has rather started to answer that question, because there then comes the question of the part-time firemen, the policemen and all those others who risk their lives.
With great respect to my hon. Friends, and even more respect to the work that the lifeboatmen do, I do not think that a case has been established that makes lifeboatmen so nearly unique as to be the only people whose pay or allowances, no matter from what source they are derived, should be made free of tax rather

than be increased by those who provide the funds.
It seems to me that the essence of the complaint we have heard tonight with some justification is that the amount is too small. This is something that could be said of others who risk their lives in order to serve the community. I suggest that the remedy is to increase the amount rather than to single out the allowance for special tax treatment.

Mr. Taveme: This is a very deserving case, and it always seems extremely hard when a Treasury Minister opposes such an obviously deserving case. Normally, the rôle of the Opposition is to press all Amendments and new Clauses because it seems to be an easy way of gaining some popularity. I do not suggest that that is why the Clause is being pressed by hon. Members opposite.
I believe that what the Chief Secretary says is basically right. Every time a deserving exception is made it gives rise to other deserving exceptions, and the whole progression never stops. It is because of the occasional concession that has been made in the past that so many anomalies have been introduced into our tax system. Therefore, as a former Treasury Minister, I sympathise with the Chief Secretary. I think that what he says must be accepted by the House, however reluctantly, because there are so many other deserving cases. What ever one's admiration for the lifeboatmen is, I feel that the Chief Secretary is, on this occasion, right.

Mr. Raymond Gower: j understand how my hon. Friend the Chief Secretary feels; it is difficult to differentiate between different types of work. Nevertheless, I believe that these people are in a somewhat special category. I cannot agree with the hon. and learned Member for Lincoln (Mr. Taverne) that we cannot make a distinction.
The police, for example, make a lifetime career of their work. They join the service, spend their whole time in it, and can rise in rank to chief commissioner or chief constable on a very high salary. Similarly, the man who becomes a member of the fire service makes that work his career. But the lifeboatmen are in a very narrow category. In order to save life they do something totally different from their normal avocation,


and how the hon. and learned Gentleman can say that they are all in the same category I just do not understand. He says that they are comparable with other people: I say that they are not. They voluntarily give their services as a spare-time occupation at great peril to their lives.
I do not understand how in those circumstances some special exemption cannot be made. I do not think that the exemption need be extended beyond this special category. I must dissent from those who think that to accept the new Clause would be to open the door. These men are brave, they do this work voluntarily in their spare time and, by golly, we should encourage people like that.

Mr. Jeffrey Thomas: Reluctant though I usually am to agree with the hon. Member for Barry (Mr. Gower) I must on this occasion do so. In my view, this is a typical piece of mean Pecksniffery on the part of the Government. These people are in a special category, they are all on their own, and in the circumstances special provision should be made for them.

Question put and negatived.

Further consideration of the Bill, as amended, adjourned.—[Mr. Maurice Macmillan.]

Bill to be further considered tomorrow.

ROSSENDALE (FOOTWEAR INDUSTRY)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hawkins.]

11.59 p.m.

Mr. Ronald Bray: In initiating this debate, it may be helpful to the House and the Minister if I briefly describe the background of the events leading up to my request for the debate. Although in the initial part of what I have to say I may give the impression that this is a maiden speech, I assure the House that the comments which have been passed in Rossendale in recent weeks about the cause of the debate have been most unmaidenly. It might also be helpful if I commented on the history of

the industries in Rossendale, particularly the boot and shoe industry.
At the time of the Industrial Revolution, or just before, when the countryside was attractive, the area was known as the Dale of the Roses. There gradually developed the cotton textile industry which continued to succeed and grow from strength to strength over the years until the latter part of the 19th century. The prosperity of the textile industry then began to decline and what I would term "second tier" industry developed in the form of the manufacture of boots, shoes and slippers. This industry employed good local labour and re-utilised many of the old cotton mills, some of which are still regularly in use, with small modifications, to this day. It was an industry literally started on a shoestring and it continued willy nilly along its path, although the shoe string has become more and more worn as time has gone by.
With only limited capital resources at their disposal, due to recessions, the shoe manufacturers could cater for only the lower price range materials, but they did that with a certain degree of success. At one time some 16 per cent. of the country's total output was produced within the group of valleys known as Rossendale. However, there was little profit in the industry and very little was ploughed back as capital.
At the end of 1970, only 18 firms were operating and it is fair to say that some were in a poor way of business. One alone employed more than 50 per cent. of the operatives within the industry. In 1960 there were some 25 firms employing 6,400 operatives which produced 18 million pairs of shoes and slippers. Last year, 1970, the number of firms had fallen by seven, so only 18 were still in business, employing 4,400 operatives, 2,000 fewer, and they produced only 16 million pairs of footwear. That is a decline in production of one-ninth, or 2 million, over ten years.
By various means, I have taken the liberty of obtaining the figures of profitability in the industry. The figures taken from a sample of 10 per cent. are appalling. They show that in the ten years from 1960–61 the average company was earning 7 per cent. on its sales and that is subject only to income tax, the balance sheet figures being 21 per cent.


Coming forward to 1969–70, the figure has dropped dramatically to the extent that this group of companies which I have examined was showing only a little over 2 per cent. on turnover and some 7 per cent. on capital employed. From this we can correctly assume that some were definitely trading at a loss and honestly had no funds whatever available for new plant or for re-equipment. Those are the employment and financial aspects.
Turning to the commercial aspect, fierce competition is experienced and has been more severe in the last 10 years from foreign and now from new Commonwealth countries, whose rates of pay and conditions of employment are far below our own. In many firms in Rossendale, short-time working has become the order of the week rather than the day. For a number of shoe firms, the outlook is grim and more, from what they tell me, could be driven into bankruptcy if swift Government action is not taken to protect the livelihood of many of my constituents for whom no other employment is immediately available. The outlook for them and for their families is equally grim.
These firms have not had the opportunity to utilise the £20 million showered by the previous Government, in their wisdom or whatever one may choose to call it, on Upper Clyde Shipbuilders. Not only in Rossendale, but throughout the shoe industry, the Government have refused to give urgent help by insisting on an origin marking Order for footwear. It is not asking too much to ask for an Order of that kind to be formulated.
I now come to an issue which has given all in the industry, and me, greater concern and worry than anything Rossendale has encountered in recent years, and that is the proposed implementation of the six-day suspension rule. In the last fortnight I have received about 1,000 letters of protest on this. That is a typical example. I have received them from all parts of Rossendale and from other constituencies. I am pleased to see my hon. Friend the Member for Nelson and Colne (Mr. Waddington) and the hon. Member for Accrington (Mr. Arthur Davidson) present, as well as other hon. Members who are similarly placed. All the letters I have received

which have been individually addressed have had a reply setting out the Government view, as well as my own, in the most plain and lucid terms.
The effect of the Bill dealing with unemployment benefit will be that a large proportion of workpeople in the footwear industry, in which there is currently no guaranteed weekly wage, will have to exist for two or three days a week without any support other than the money they draw for the balance of the week by virtue of their labours. The trade is essentially seasonal and, in some circumstances, six, eight, and 10 weeks have been worked "on the trot". I submit that the intentions of the Government are not equitable for the employees of an industry which works on this basis. Strong representations have been made to me not only by the unions but by the Lancashire Footwear Manufacturers Association, which has requested a joint meeting between the unions, itself and myself in the very near future. This will take place, and I hope to have some good news to offer them.
Earlier I commented on the very difficult financial circumstances of certain companies. I am reliably informed that, while many of them would like to see a guaranteed working week agreement established, the extra cost involved as a direct result of continuous spells of short time working could be bankruptcy for some smaller firms and severe financial hardship for others. The local footwear trade union is also very conscious of this grim fact which could lead to many of its members, who are my constituents, being unemployed with little immediate choice of alternative work in the vicinity or in the immediate future. In time this could lead to further depopulation in the valleys, and I cite the borough of Bacup which at its optimum had a population of 24,000. Currently the figure is about 16,000. I suggest to the Government that every action should be taken to prevent a further decline in its population.
These are the difficulties of a major industry in Rossendale. The boot and shoe industry does not seek charity. It never has done so and I sincerely hope that it never will. All I ask is that it be given every reasonable consideration, and I am sure that the whole House supports me in this request. It wishes to have the opportunity to restructure itself and make


itself ready to meet every challenge, to face our possible membership of the European Economic Community with confidence and to make a success of it. The president of the Footwear Manufacturers Association stated that only last week in his annual address. But a degree of restructuring must be effected in the interim.
The people who work in Rossendale are grand folk. They work hard. We have no labour difficulties. Sometimes there is a shortage of labour. But these are valley communities, and from generation to generation they have been dependent on the industries in the valley. We must ensure that, subject to their providing the effort and the right product at the right price, they are there for keeps and that they continue to prosper.
As I see it, three major Government Departments are intimately involved in the future of Rossendale's footwear industry, as they are in footwear industries in the rest of the country. I look to them personally for their joint and several co-operation in meeting the points raised in this short debate. The Department of Trade and Industry has it in its power to provide a degree of aid by discouraging the import of cheap-labour footwear from overseas, thus varying the policy of the previous Administration. In the first five months of this year. Britain imported 38 million pairs of shoes, of which 50 per cent. came from Hong Kong, which is a cheap-labour area.
Last year, total British production was just over 190 million pairs of shoes. In addition, 65 million pairs were imported—roughly one third of the total production. Of this total 53½ per cent. came from Hong Kong and 20 per cent. from Taiwan. The cost of these imports to the United Kingdom was £35 million, and I suggest that it is fundamentally wrong that when we have the capacity in this country such a high proportion should be imported, much of it from countries to whom we owe no allegiance and from whom we ask none.
I referred earlier to the introduction of an origin-marking Order. This would also help the customer who wishes to buy British and does not want to be foisted off with foreign footwear.
The next Department involved is the Department of Employment. It could

well assist with guidance to employers and unions in respect of the advantages of guaranteed working week agreements. It would have little else to do, because in Rossendale we have, and will continue to have, excellent working relations between labour and management.
I come to the Department which has triggered off the debate by proposing to implement a Section of the 1966 National Insurance Act. I do not ask much of the Department of Health and Social Security, just that it should defer the implementation of the six-day suspension rule in those sections of industry—and here I broaden my remarks to include industry as a whole—where there is no guaranteed working week agreement. I suggest that it would not be asking too much that this be deferred for four or five years until such time as a satisfactory agreement can be established. This would give the respective industries a chance to restructure and consequently absorb the extra costs involved by the introduction of a guaranteed working week. I would welcome the introduction of a working week for all sections of industry, but I feel, and here I agree with the Government, that it is not for them to impose a guaranteed working week. This is for employers and unions to get together and work in their mutual interests to establish a system of working week which best suits the economics of the industry. I ask when the Minister replies that he speaks for all the three Departments involved and tells us how the Rossendale boot and shoe industry can prosper and look forward to the future with confidence.

Mr. Tom Boardman: I know of my hon. Friend's interest in the footwear industry, as he knows of mine. In making his remarks about the guaranteed working week, will he say whether he is taking the specific case of the Rossendale Valley? He has made general references to the shoe industry and the problems of certain sections of the industry. Are his criticisms on this narrower point related, as I believe they are, entirely to Rossendale Valley, which perhaps could have a special problem?

Mr. Bray: I thank my hon. Friend for that intervention. I am happy to say that the whole of the British shoe


industry, with the exception of the Rossendale Valley, already enjoys a working week agreement which stands at 75 per cent. There are preliminary negotiations going on between the unions and the employers aimed at securing a working week agreement. As I have said, the employers are extremely dubious about the wisdom of implementing it, for financial reasons, and the unions, for their part, are equally dubious about the advisability of pressing their point for fear of redundancy. In the long term, I feel that there is everything to be gained by its implementation, but in the short term I appreciate the caution with which the trade union in the area approaches the subject.

12.20 a.m.

Mr. Arthur Davidson: I compliment the hon. Member for Rossendale (Mr. Bray) on pointing out to the House the difficulties that will hit employees in this important industry in North-East Lancashire if the Government continue with their policy of applying the six-day suspension rule to flat-rate unemployment benefit. It certainly would not be right for me to go into the merits of the Government's proposals, but the hon. Member is right to point out that this industry, because there is no guaranteed week and because it is subject to periodic short-time working, will be particularly hard hit by the Government's proposals.
Like the hon. Member for Rossendale, I have many constituents who work in the industry, and I also have received the letter to which he has referred. The union points out that due to the Government's intentions to implement these proposals, it has been given only seven months in which to negotiate a guaranteed week with the Lancashire Footwear Manufacturers' Association. The union says—I rely on the letter being factual— that that is a quite inadequate, ludicrous length of time. I would go further than the hon. Member—

Mr. David Waddington: Is not the difficulty that when the Labour Government, in the 1966 Act, took power to suspend the payment of unemployment benefit for short-term unemployment, they envisaged that time should be given to employees and employers

to reach arrangements such as guaranteed weeks? Although that power was taken in 1966, however, precisely nothing has been done until now by management or by the unions.
Take the textile industry. I under stand from my inquiries the other day that it was only a month ago—

Mr. Deputy Speaker (Miss Harvie Anderson): Order. I hope that the hon. Member will remember the subject of the debate and the shortness of its duration.

Mr. Waddington: Yes, Mr. Deputy Speaker. Does not the hon. Member recognise that a great deal of time has been given to both sides of industry to put their own houses in order but that precisely nothing seems to have been done?

Mr. Davidson: I recognise that I have precisely a quarter of a minute to reply to that extremely long intervention. I will allow the Minister to reply to the debate.

12.23 a.m.

The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): This has been an interesting debate, and I must be very brief in view of the short time available. I am grateful to my hon. Friend the Member for Rossendale (Mr. Bray) for putting the problems of the industry in his constituency so clearly. He speaks with knowledge and authority and he has put the case effectively and persistently over recent months to the three Departments he has mentioned.
The point which has been put by my hon. Friend has been amplified by the hon. Member for Accrington (Mr. Arthur Davidson) and by my hon. Friend the Member for Nelson and Colne (Mr. Waddington), who has cogently pointed out that there has been a great deal of time in which industry has had warning of what was afoot. That must be my answer to my hon. Friend when he asks me whether the introduction of the six-day suspension rule can be postponed still further.
The fact is, as my hon. Friend the Member for Nelson and Colne has just pointed out, that this matter was in the air as long ago as 1966, when it appeared


in the Labour Government's National Insurance Act of that year. The rule applied to the earnings-related supplement straight away and it was to apply to flat-rate unemployment benefit from March, 1969. That was intended to give industry time to readjust and to make the appropriate arrangements. We now propose that it should apply from 1st January, 1972, which will mean that industry has had over five years in which to prepare itself. When Parliament agreed to the bringing into operation of the Order a few weeks ago, it was not opposed by either side of the House.
I am glad that my hon. Friend spoke in favour of a guaranteed working week arrangement. He said that he would welcome this at the earliest possible opportunity. I reiterate that this is exactly what my right hon. Friend the Secretary of State for Social Services has said. I think my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) when he spoke about the industry in other parts of the country was referring to the fact that the footwear industry generally has an agreement of this kind. We welcome guaranteed agreements, but we do not intend to introduce legislation to make them compulsory. We think it better that they should be freely negotiated so that they can be tailor-made to meet the requirements of individual industries.
Why is this six-day suspension rule being introduced? The first reason is that we are spending substantially more where the need is greatest. I need mention only the over-80s, the chronic sick, widows and the substantial increase in benefits in September, the biggest ever in money terms, a substantial increase in real value—all this costing £600 million, some of which will go to my hon. Friend's constituency. In addition, there

is substantial extra expenditure on health and welfare.
If we are to achieve these things we must try to save where we can, where expenditure is no longer high enough on the priority list to be justified. The present system in modern times is a subsidy on short-time working which costs the National Insurance Scheme about £3 million a year. In other words, the National Insurance contributions of employees generally, including those on low pay but regular work, are subsidising earnings in a few industries, often highly paid ones like the motor industry. In our judgment this is neither fair nor equitable.
The present rules also lead to misunderstandings and uneven results, for example, between day and night workers, and in some cases the pattern of work is manipulated to obtain the maximum possible benefit. We feel, in our responsibility to those who contribute to the National Insurance Fund, that this is no longer a sufficiently high priority to warrant continuation of this expenditure and that the solution lies in agreements voluntarily reached between the employers and unions concerned.
My hon. Friend also mentioned several points which concern other Departments. As he will know, the parts of his constituency which he particularly mentioned are included in the North-East Lancashire intermediate area and therefore get the attendant benefits which come from that. An advance factory has been recently started, and there are a number of road programmes and improved housing programmes, all of which will help the economic prospects of his constituency and the area concerned.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Twelve o'clock.